Food delivery giant Swiggy is rolling out an instant-delivery service for groceries and household goods that may give it an edge over existing grocery delivery majors like Bigbasket and Grofers in a soon-to-be USD 10.5 billion e-grocery-market.
Dubbed as Instamart, the new service is essentially an online retail store, which will offer about 2,500 fast-moving, high demand products to customers with the delivery time between 30 and 45 minutes.
“We are currently testing Swiggy Instamart. Through Instamart, we want to introduce the convenience grocery category in India,” Swiggy said in a statement.
“With the fastest deliveries in the segment (30 to 45 minutes), day and night serviceability (7 am to 12 midnight), a wide assortment across categories such as instant meals, snacks, ice creams, beverages, fruits & vegetables,” the company said, Instamart will address “the unmet grocery needs of the time-pressed, convenience-seeking urban consumer.”
Swiggy has rolled out the service in Gurugram today, with Bengaluru expected to follow soon.
It is to be noted that the company already delivers grocery through Swiggy Store, which partners with neighborhood stores, locally known as kiranas, to facilitate grocery delivery in two hours. Under the arrangement, Swiggy provides kirana shops a partner app through which they can come online and digitize their inventory to tap online customers. It launched the service in 2018, and scaled it up to almost 300 cities in April and May to capitalize on increasing demand for delivery of essential products during the nation-wide lockdown.
After the lockdown was lifted, the company optimized the Swiggy Stores business, shutting it down in locations where the demand was minimal as it struggled to cut costs and stay afloat through the COVID-19-induced economic slump. At the moment, Swiggy Stores is present in all tier 1 and tier 2 cities, which comes up to about 100 cities.
However, it seems now that the company had been working on evolving its grocery-delivery strategy all along, aiming to grab the bigger pie of the rapidly growing e-grocery market. It has taken some of the learnings from its existing Swiggy Stores to come up with a service that overcomes the shortcomings in the existing service.
For instance, a lot of kirana stores do not have an online, real-time inventory tracking system. Thus, these stores end up listing the products that are not really available. It’s only when the delivery executive reaches the store to pick up the order, the issue comes to light. This results into a decreased order fulfillment rate.
Under Instamart, the company aims to track and have a better control over the inventory, which would help it to improve the consumer experience.
For its quick delivery service of groceries, Swiggy has partnered with select local entrepreneurs-cum-retailers, who will set up delivery-only shops where they will source high-demand products from suppliers, and offer it through Swiggy’s Instamart. Once the customer places an order, Swiggy will ensure instant delivery.
The company is setting the parameters for its select partners who would run these delivery-only shops, to standardize the products as well as customer experience.
This essentially means, the company is following the cloud-kitchen or delivery-only restaurant approach for Instamart, under which it is partnering with local micro-entrepreneurs to set up delivery-only outlets for grocery delivery.
A report by local media Economic Times (ET), citing sources, said “there are about ten dark stores of 1,800-2,500 sq ft set up in Bengaluru, covering 85-90% catchment areas within a 5-6 km radius.”
Moreover, these delivery-only stores will have high demand items, based on the data Swiggy has collated from Swiggy Stores. Depending on the traction Instamart gets in Gurugram and Bengaluru, the company would decide whether to scale it up or not.
According to the company, Instamart will complement Swiggy Stores, which the company will continue to run. In fact, it is looking to add new stores and new products to its Swiggy Stores.
Industry experts believe Swiggy’s expertise in the last-mile delivery and its expansive logistic infrastructure gives it an edge over rivals. Major players like Bigbasket, Grofers, Amazon, and the recent entrant Reliance-owned JioMart allow customers to choose delivery slots that start from the same day and can go up to a few days. Google-backed Dunzo is the only prominent player that offers instant delivery of groceries, essentials, medicines, and food, among other things.
According to ET, investors feel a new service would provide Swiggy the newer opportunities to monetize.
“The biggest monetization perspective is that this model offers a direct 15-17% gross margin on products plus the opportunity to monetize brands, compared to marketplace commissions which are close to 4-5%,” the investor told the local media.
The move has made Swiggy the latest entrant into the quick delivery service market. Late July, Walmart-owned e-commerce giant Flipkart said it was looking to roll out hyperlocal 90-minute delivery service called Flipkart Quick for categories such as grocery, home accessories, mobile phones, and stationery, among other things.