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Food delivery giant Zomato scraps grocery play again as India’s quick commerce trend heats up

Written by Ben Jiang Bin Published on     2 mins read

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At the same time, quick commerce is expected to grow to become a 5 billion dollar market in the next five years.

Zomato, one of India’s food delivery giants, announced Friday in an email that it will pull the plug on its grocery delivery service in mid-September as competition heats up and challenges in inventory management and order fulfillment rise.

This is the second time that Zomato has abandoned this business, which was resurrected two months ago in a few select markets, including the country’s capital city New Delhi, providing 45-minute grocery deliveries. At the same time, most of the players in the grocery delivery field, such as Google-backed Dunzo and its arch-rival Swiggy-backed Instamart, are promising 15-minute deliveries.

In an announcement email sent on September 11, the Gurgaon-based company said the business had “moderate success” but also conceded that it was challenged by matters like frequently changing inventory and gaps in fulfillment that led to unsatisfactory customer experience.

“… the express delivery model, with under 15-minute deliveries and near-perfect fulfillment rates, has been getting a lot of traction with customers and expanding rapidly, we have realized it is extremely difficult to pull off such a delivery promise with high fulfillment rates…”, Zomato acknowledged in the email.

The Gurgaon-based company first tried out grocery delivery in 2020 during the COVID-induced national lockdown in India, when local citizens were forced to procure daily necessities online. The service, which was launched in more than 80 cities at the time, was discontinued later after the company realized it was hard to scale up.

The food delivery giant’s re-entry to the online grocery market is ill-timed. A bevy of local online grocery players are piling into a new trend dubbed quick commerce, where deep-pocketed players, including aforementioned Dunzo and Instamart in addition to JioMart and BigBasket, backed respectively by Indian conglomerates Reliance Industries and Tata Group, are promising 10-15 minutes or even lesser time to deliver groceries to a consumer’s doorstep. A recent survey by local consultancy RedSeer suggested that quick commerce in the South Asian country is expected to grow 10x to 15x to become a USD 5 billion market by 2025.

Quick commerce market growth in India. Source: RedSeer.

And Zomato is not to entirely quit on a growing and lucrative market. Earlier, the company invested USD 100 million into Grofers. A company spokesperson told KrASIA in an emailed statement saying that “Grofers has found a high-quality product-market fit in ten-minute grocery.” It believes that its capital injection into the company will generate better outcomes than its in-house grocery effort.

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