HYPERLOCAL BUSINESS: SWIGGY’S ‘BASKET’ TO GET ‘BIG’GER
Foodtech leader Swiggy has announced its entry in the hyperlocal delivery business with a pilot in Gurugram.
DKODING NEWSLINE – Feb 21, 2019
- Foodtech startup Swiggy has launched its hyperlocal platform Swiggy Stores, which will deliver household products like groceries, flowers and medicines.
- The company had made its intentions aptly clear when it acquired Mumbai-based hyperlocal startupScootsy last year.
- Hyperlocal delivery is a huge business opportunity in India attracting several startups like Big Basket, Grofers, Google-backed Dunzo along with Amazon & Flipkart.
- Swiggy’s core competencies and delivery network will work to its advantage, but operational costs could increase in the short term.
It is pretty routine for Indians to regularly take short walks from their houses to the network of stores in the locality to pick up an assortment of items – medicines, groceries, milk, etc. Little would they have realised a few years back, that this in itself would emerge as a multi-billion dollar business opportunity – DEEPAK KAISTHA | DKODING NEWSLINE
Hyper-local delivery is one of the most popular segments of the Indian retail market, with players like Big Basket, Grofers and Google-backed Dunzo jostling for a space with e-commerce giants Amazon and Flipkart.
Foodtech firm Swiggy is reportedly planning its full-fledged foray into hyperlocal deliveries with the launch of ‘Swiggy Stores’, which will be integrated with its app. They will deliver household products like groceries, flowers and medicines to your house within an hour.
Power of Plenty:
The Bengaluru-based startup will pilot this new venture in Gurugram, where it has partnered with 3,500 stores including Zappfresh, Healthkart and Apollo Pharmacy. Swiggy chief executive Sriharsha Majety, commented in his blog:
“Think of Swiggy Stores as the superpower that connects you to every store, retailer or brand in the city. If you already know what you want and from what store, great! Just type out the list of items and Swiggy will bring that to you. If you don’t, Swiggy Stores will also connect users to popular stores and list bestsellers for them to discover and be seamlessly delivered by Swiggy.”
In a manner similar to what Swiggy has done for restaurants, Swiggy Stores will also help customers discover popular stores in the vicinity.
Swiggy had made its intentions aptly clear with regard to hyper-local delivery when it acquired online startup Scootsy Logistics in August last year. Scootsy Logistics was a startup delivering food, fashion, apparel, accessories, etc in Mumbai. Soon enough, Swiggy bought another Mumbai-based milk delivery startup SuprDaily in a cash deal. It also acqui-hired AI startup Kint.io last month, which specialises in technology for hyperlocal discovery and on-demand delivery.
The company has been through a phenomenal 2018 in terms of funding. It received a funding of US$ 1 billion in its last round led by Naspers in December. Interestingly, the target was US$ 900 million, but the round was oversubscribed due to huge investor interest. This investment valued Swiggy at around US$ 3.3 billion. In all Swiggy has raised US$ 1.26 billion so far.
Is the Unit Economics Feasible?
The food and grocery market is estimated at around US$ 300 billion and is projected to grow to US$ 1 trillion by 2030. Around 98% of this market still comes under the fragmented network of 11 million kirana stores across the country.
Hyperlocal delivery startups raised US$ 82.6 million across 10 deals in the first half of 2018, compared to US$ 15.2 million across 5 deals in the same period the previous year.
Swiggy’s delivery network across around 80 cities, 60,000 restaurants and a delivery staff of over 1.25 lakh will work to its advantage. Besides, it already has a strong customer base as leverage. Its investments and growing expertise in futuristic technology, especially AI, will further help it optimise the microeconomic aspects, just like it has done successfully with the foodtech business.
- There are
questions to be answeredthough, like the kind of ticket size that the company will allow for free order delivery. Swiggy’s model at this stage is not as robustas that of platforms like Big Basket, which have their own delivery stores and follow an inventory-led model.
- Unlike food delivery, customers may ask for products on the app that need to be picked from different grocery stores, which means the
operational costs and time taken will increasefor Swiggy staff.
- Moreover, the traditional kirana model works on – ‘line of credit’. So Swiggy may face a resistance from customers like other hyperlocal models as it relies on upfront payments.
- The model would hinge on heavy discounts and cash burn initially, even higher than their food delivery business.