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Indian food-delivery unicorn Swiggy sees gold in sundry delivery and cloud kitchens

Swiggy is in for a twin attack on Dunzo and Zomato.

Photo by Lucian Alexe on Unsplash

In September 2019, India’s largest food delivery platform Swiggy, in its bid to diversify from its core business of food delivery service launched Swiggy Go in Bengaluru that would service last-mile delivery requirement of just about anything, such as lunch box to clothes to smartphones forgotten at home.

In just three months into this new vertical, Swiggy aims to procure 30% of its overall revenue in the next few years from all types of delivery including grocery, and its new growing initiative of cloud kitchens.

It has a twin model for its hyperlocal delivery services, Swiggy Go and Swiggy Stores. While Swigy Go is a concierge service, which it claims to expand to 300 cities by the end of 2020, the latter is an on-demand delivery service launched in March 2019. Swiggy Stores matches users’ query to the inventory from its partner stores closes to the users’ location to deliver any product from that store.

This is its full-fledged onslaught on its biggest competitor–Google-backed Dunzo, a four-year old company that works as a personal assistant and does tasks such as pay bills, pick up sundry products from one place and deliver it somewhere else, send courier on users’ behalf among scores of other tasks.

Swiggy entered this space after it acquired hyperlocal delivery startup Supr Daily in September, last year. It claims to have a fleet size of 220,000 delivery people which it wants to utilize in a better way rather than just keep them for food deliveries.

Swiggy’s diversification into delivery other than food is an anti-dote to the cash burn it is indulging in through discounts and other marketing spends. Swiggy and Zomato burnt USD 30-40 million per month to grab the market which they have pared down recently. Other players like UberEats and Ola’s Foodpanda have also reigned in their cash outflow to exist in the market during the last six months.

Keeping the big picture in mind, Swiggy is planning to infuse money into its food delivery unit, cloud kitchen operations, Swiggy Go, and Swiggy Stores–giving priority in that order to turn profitable, according to Swiggy CEO Sriharsha Majety.

Swiggy has raised funds worth USD 1.3 billion till date since its inception in 2014 and is valued at USD 3.3 billion. Naspers, the South African internet and media group, holds almost a 40% stake in the company, and might lead another funding round shortly according to local paper Economic Times.

Lately, Swiggy has become the first food delivery aggregator in India to create over 1000 cloud kitchens for its restaurant partners enabled by the two year old Swiggy Access initiative. Majety points out that Swiggy will scale up various pods housing cloud kitchens to be within a 10-minute radius of 99% of its customers. The restaurant partners are provided real estate, data science, operational efficiency, and access to new geographies.

“With the massive growth in online food ordering over the last 2-3 years, India has leapfrogged the widespread in-restaurant dining culture that was prevalent in many international markets. Swiggy has always maintained that cloud kitchens will be the future of food delivery. Very soon, India will have the second-highest number of cloud kitchens in the world, only next to China,” remarked Vishal Bhatia, CEO, new supply, Swiggy to local paper Deccan Chronicle.