Swiggy Instamart has cut the minimum order value for free delivery to Rs 99, while Zomato-owned Blinkit, which has traditionally levied customers a fee to deliver regardless of the order size, recently started offering free deliveries for orders above Rs 199.
While still far behind its established rivals, Flipkart Minutes – a new entrant in the rapid delivery segment – hit daily orders of 50,000-60,000 during its Big Billion Days sales, people with knowledge of the matter said, indicating growing acceptance for the Walmart-owned company’s new service.
For Flipkart Minutes, the average order value is higher than that of the top three players, according to the people.
“The peak was hit during Big Billion Days but it’s a promising sign for a new entrant,” said one of the persons, who did not wish to be identified.
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Another person said, “Numbers are showing there is intense competition and everyone’s tweaking the available levers. Swiggy was fast to react on delivery charge threshold while Blinkit has been gradually reducing the same in non-Delhi-NCR (National Capital Region) markets.”
Meanwhile, Zepto is fast emerging as the closest rival challenging market leader Blinkit in major markets by spending on expansion and incentives. It is now clocking 700,000-750,000 orders per day on average but witnesses a peak of about 900,000 orders a day during festivals, said people briefed on the numbers.
ET reported on October 22 that Zepto spent well over $20 million in September, including cash and capital expenditure investments.
Swiggy Instamart has similar daily order numbers, while Blinkit delivers about a million orders a day on average, said a person tracking the sector. Blinkit clocked 93 million orders in the September quarter.
While Blinkit is at around $2.9 billion annualised gross sale run-rate, Zepto has hit $2 billion, according to a memo the company shared with investors.
Also Read: Blinkit unit economics hit in July-September on back of investment ramp up
Emails sent to Flipkart and Swiggy didn’t elicit any response.
Quick commerce firms augment their usual inventory with festival specific goods that are in high demand on those days, leading to additional offtake of their services.
ET reported on October 19 that the fresh fundraising by Zomato, at a time when both Swiggy and Zepto are also arming themselves with cash, could lead to increased competition in the fired up quick commerce sector as companies are expected to increase spending.
“Pricing strategy has always been key for online commerce companies to attract customers, particularly in the festive season. Zomato’s QIP (qualified institutional placement) means it is readying Blinkit for price wars if it comes to that… Blinkit is already the market leader and has a lot to lose, particularly with new players also coming in. This communicates to the market that it is ready to fight it out,” said a senior quick commerce executive.
One of the people cited earlier said, “Blinkit is also taking the battle to others’ markets… this will really play out in the ongoing quarter and reflect in the October-December numbers due to festive spends.”
Quick commerce is seeing cyclical spikes within a month, the person said.
Zomato’s chief financial officer Akshant Goyal had said on Tuesday that the share of Delhi-NCR market in Blinkit’s business had come down to 40% from 47% as it built its muscle in other markets. He claimed that Blinkit is the largest player in all major metro cities barring Hyderabad and Chennai, where industry executives say Zepto has a lead.
Discounting wars
On Tuesday, explaining the rationale behind the massive fundraising, Zomato founder and CEO Deepinder Goyal said, “We believe that we need to enhance our cash balance given the competitive landscape and the much larger scale of our business today… We believe that capital by itself does not give anyone the right to win (and that service quality is the key determinant of success), but we want to ensure that we are on a level playing field with our competitors, who continue to raise additional capital.”
A research note from Jefferies on Wednesday said that “strong growth and $2.3 billion of cash is better than $1.3 billion”, underscoring the importance of increasing total cash balance for Zomato-Blinkit. Brokerage firm CLSA said, “With a closing cash balance of $1.3 billion as of September quarter, if Zomato successfully raises another $1 billion, it would improve the company’s cash position significantly over competitors and reduce the risk of price-led competition.”
“Unless there is an irrational rise in competitive intensity in quick commerce, we expect the company (Zomato) to deliver very strong earnings growth,” JM Financial said in a report.
Expansion underway
Both Blinkit and Zepto have been undertaking aggressive expansion of their dark store footprint, with the Gurgaon-based firm having added 152 such micro warehouses in the September quarter to take the total count to 791. Zepto has surpassed 500 dark stores, and is on track to hit 700 by March.
Also Read: Cash-rich quick commerce firms rush to grab dark store sites, personnel amid rapid growth
While Blinkit is expanding into new markets, it is also doubling down on existing cities, where it believes overall quick commerce penetration levels are still low.
ETtechFood delivery
Zomato and Swiggy have increased the platform fee they charge users for food delivery orders.
In a notification on the app, Zomato said it was increasing the fee to Rs 10 to handle the festive rush.
Both players increased the platform fee from Rs 7, which they had introduced last year.
In a statement, a Zomato spokesperson said, “These are business calls which we take basis various factors from time to time.”