Indians Embrace 10-Minute Grocery Apps, Pressuring Small Retailers

Pujit Siddhant

Jul 16 2024

<div style=' background:#FFFFFF;color:#000000;font-family:Verdana;width:auto;padding:5px;max-height:100%;'><span><p>In a middle-class suburb of Mumbai, workers at SoftBank-backed Swiggy's grocery warehouse are racing to deliver orders within 10 minutes, with their speed monitored by the second. Outside, Swiggy's delivery personnel in bright orange T-shirts collect and deliver grocery orders, quickly returning for more assignments.</p><p>Swiggy warehouses are proliferating across India, offering fast delivery of items ranging from milk to roses, changing the shopping habits of Indians and posing a threat to traditional mom-and-pop stores. Previously, these small retailers dominated the grocery trade in India, where big supermarkets are less common and mostly found in affluent areas.</p><p>Indian consumers, who once relied on neighborhood stores for groceries or phone orders, have been increasingly turning to e-commerce platforms like Amazon and Walmart's Flipkart. However, these giants, which offer same-day or next-day delivery, are not as fast with groceries as Swiggy and its rivals Zepto and Zomato's Blinkit, which are driving a "quick commerce" boom.</p><p>Goldman Sachs reported in April that quick deliveries now account for $5 billion, or 45%, of India's $11 billion online grocery market. With shoppers prioritizing convenience and speed, quick commerce is expected to make up 70% of the online grocery market, projected to reach $60 billion by 2030.</p><p>Swiggy, originally a restaurant food delivery service launched in 2014 and now valued at $10 billion, is increasingly focusing on the "last-minute" grocery business in India. A Swiggy strategy document from December 2023, seen by Reuters, highlights the company's target of urban consumers aged 21-35 who value convenience.</p><p>Swiggy did not comment on the document or its broader strategy. The company plans to expand its warehouse count from 500 to 750 by April 2025, according to an executive from one of Swiggy's financial investors, which include Prosus, the Qatar Investment Authority, and Singapore's GIC.</p><p>While global quick-delivery startups have struggled post-pandemic, India is witnessing a different trend. Consultancy Kearney noted that quick commerce firms benefit from affordable warehousing and the Indian consumer's habit of ordering small quantities by phone.&nbsp;</p><p>Despite the convenience, the rise of quick commerce is putting pressure on smaller retail stores. Mumbai grocer Prem Patel, for example, has seen his daily sales drop by half due to the competition. Four retailer associations representing 90,000 grocery shops reported monthly sales declines of 10% to 60% for some stores.</p><p>Some traditional stores are adapting by becoming more tech-savvy. In Gujarat, around 500 stores have started using WhatsApp groups to take orders and deliver goods quickly within a 4-mile radius, according to retail association chair Hiren Gandhi.</p><p>Swiggy's Instamart quick commerce division has seen significant growth, with its annualized order value rising from $340 million in December 2021 to $1 billion in September last year, though the business remains unprofitable. Swiggy's main rival, Zomato, acquired quick commerce company Blinkit in 2022. Blinkit is now more valuable to Zomato than its food delivery service and is expected to post $2.7 billion in orders this year. Zomato reported that Blinkit had broken even for the first time but expected operating profit to remain around zero for the next few quarters.</p><p>Analysts caution that reliance on urban customers and high spending on promotions could be risky for quick commerce firms in the low-margin grocery business. However, Swiggy and Blinkit are diversifying beyond groceries into higher-margin products, such as fitness items and electronics. Swiggy's internal document described Instamart as an "Indian version of 7 Eleven (on the cloud)" but noted a shift in positioning to an "online Supermarket."</p><span></div>

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