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Flipkart beefs up its grocery delivery with USD 60 million investment in Shadowfax

Flipkart will have an edge over Amazon, Bigbasket, and Grofers with additional access to Shadowfax’s technology and delivery fleet.

Image Credit To Flipkart.

Walmart-owned Flipkart has taken one more step towards grabbing a larger pie of a soon-to-be USD 10.5-billion e-grocery market with a USD 60 million investment in Bengaluru-based logistics startup Shadowfax.

The move will enable the e-tailer to make faster same-day deliveries that will give a required boost to its nascent grocery business.

Founded by Abhishek Bansal and Vaibhav Khandelwal in 2015, Shadowfax offers hyper-local, same-day, and next-day delivery services across more than 150 cities and towns. It counts Fidelity International as its largest investor which has about 37% stake. Local media Economic Times reported that the investment round valued Shadowfax at about USD 200 to 250 million, and is also likely to see other new investors join.

Apart from Flipkart, Shadowfax also works with Amazon, Swiggy, BigBasket, Nykaa, and Paytm. The new investment will give Flipkart an edge over its rivals in the online grocery segment including Amazon India, Bigbasket, and Grofers as it would now have access to Shadowfax’s technology as well as additional fleet. In turn, Flipkart would be able to accelerate hyper-local grocery initiatives and build capabilities for other on-demand logistics use cases.

Under its hyperlocal approach, Flipkart plans to leverage local mom-and-pop stores, also called kirana shops from Shadowfax’s network to keep the inventory closer to customers for faster deliveries.

Flipkart chief executive officer (CEO) Kalyan Krishnamurthy, in a media statement, said Shadowfax’s tech-enabled innovations will help the company significantly reduce delivery time and provide superior customer experiences across product categories.

“By leveraging kirana stores and the deep delivery capabilities of Shadowfax and other Flipkart-led innovations, we are building a strong foundation to make inroads into a dynamic hyperlocal consumer market,” he said.

The Shadowfax investment adds muscle to Flipkart’s in-house logistics operations. The company runs logistics and supply chain arm, Ekart, which delivers shipments across 19,000 pin codes.

Flipkart made its move into grocery space in the first half of 2018–two years after shutting down its grocery delivery service Nearby. It launched Supermart in May 2018, initially for Bengaluru customers, but later expanded it to other cities. The company is now planning to open self-owned brick-and-mortar stores to sell food items to take on its arch-rival Amazon India.

The Indian unit of US-based e-commerce giant, first entered grocery delivery in 2016 with Prime Now (formerly Amazon Now), which promised two-hour delivery service. However, by mid-2018 it restricted the service to Amazon Prime subscribers only and made it into a separate app. The same year, it launched Amazon Pantry on its main shopping app with the delivery time of one to two days.

In August this year, Amazon brought its 12-year-old global e-grocery offering Amazon Fresh to India and integrated it on its main website and app with a promise to deliver groceries in two hours.

Aside from Amazon, Flipkart’s Supermart competes with Alibaba-backed Bigbasket and SoftBank-backed Grofers, which together own the lion’s share of the e-grocery market.

According to a recent report by consulting firm RedSeer, Indian online grocery market, which stood at USD 1.05 billion in 2018 contributing a mere 0.2% to the USD 525 billion worth food and grocery market, is projected to grow ten-folds, accounting for 1.2% of the USD 880-billion total grocery market by 2023.

“Grocery is certainly a volume-driven category because it has some of the lowest margins in retail, so the segment would become profitable, once enough volume is there,” said Satish Meena, an analyst at Forrester. “And Walmart knows this because they are the biggest grocery retailer. They can only make money if they sell grocery.”

Abhishek Bansal, CEO, Shadowfax, during media interactions, said that the company plans to invest in bringing more kirana stores on its platform as well as in building automated warehouses across the top 10 cities to enable backward integration and provide end-to-end service to the clients. He said the company also plans to grow 10x in the next four years and take the company public.