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Swiggy to invest USD 700 million in express grocery delivery service as quick commerce competition intensifies

Written by Moulishree Srivastava Published on     3 mins read

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India’s quick commerce sector is set to reach USD 300 million by the end of 2021 and hit USD 5 billion by 2025.

In a move that will intensify competition in the fast-moving quick commerce space in India, food delivery giant Swiggy will invest USD 700 million in express grocery delivery service Instamart.

Quick commerce—wherein companies pledge to deliver goods within 10–30 minutes after an order is placed—has been on the rise in the South Asian nation since late last year, on the back of wide adoption of internet-based services and millions of urban millennials willing to pay a premium for convenience.

The Bengaluru-headquartered company launched Instamart in Bengaluru and Gurugram in August 2020 to deliver high-demand grocery and household goods to customers within 45 minutes. The service, which is currently present in 18 cities, clocks more than 1 million orders per week, Swiggy said in a statement on Thursday.

With the capital infusion, the company is planning to bring down the delivery time to 15 minutes to match rivals—Zomato-backed Grofers, Google-backed hyperlocal services platform Dunzo, and new entrant Zepto, all of which promise to deliver goods in within 20 minutes.

E-grocery firm Grofers, which raised over USD 100 million from Zomato in June 2021, aims to have 350 dark stores or delivery-only retail outlets by the end of 2021, a significant buildout from November’s 200, in order to make deliveries within 10 minutes.

Meanwhile, Dunzo is in process of setting up 300 micro-fulfillment centers to ensure delivery in under 19 minutes. Quick commerce startup Zepto, which was founded earlier this year and promises 10-minute deliveries, recently raised USD 60 million in its first round of funding at a post-money valuation of USD 225 million.

“In the last few months, Swiggy Instamart has onboarded more than one seller-run dark store every day,” Swiggy said. “By January 2022, it will make deliveries in 15 minutes by having the network of dark stores very close to the majority of its customers.”

The development comes at a time when Tata-owned BigBasket—the category leader in the country’s e-grocery segment—is reportedly looking to launch an express delivery service, BB Now, which will take groceries to customers’ doorsteps in 10–20 minutes, this month. Interestingly, cab-hailing giant Ola is also reported to have begun piloting a quick delivery service for grocery items from around 15 dark stores across Mumbai and Bangalore last month.

According to a recent report by Bengaluru-based consulting and research firm RedSeer, the value of India’s quick commerce sector is set to reach USD 300 million by the end of this year and touch USD 5 billion by 2025.

Swiggy is likely to fund the USD 700 million investment in Instamart by using cash from the SoftBank and Prosus-led USD 1.25 billion round it closed in July. A significant chunk of the money will go into adding 100 dark stores over the next three months, which will take the total number of these delivery-only outlets to 250.

Based on the company’s current growth trajectory, Swiggy CEO Sriharsha Majety expects Instamart to reach USD 1 billion in annualized gross merchandise value (GMV) in the next three quarters.

“With our food delivery business trending at a USD 3 billion annualized GMV run rate, and Instamart’s supercharged growth, we’re very excited about our convenience mission coming to life in a very big way,” said Majety.

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