Sun, Jun 16, 2024 page12

• India hooked on speedy grocery apps, squeezing small stores

  As global start-ups struggle, quick grocery delivery firms in India are betting big on online shoppers, with Goldman saying that the market could reach US$60 billion by 2030

  • By M. Sriram and Dhwani Pandya / Reuters, MUMBAI, India
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  In a middle-class suburb of Mumbai, workers at Softbank Group Corp-backed Swiggy’s grocery warehouse race against time to deliver orders within 10 minutes. Their speed is tracked by the seconds on a screen that flashes red warnings if they are going too slow.

  Outside in the sweltering heat, Swiggy’s bikers, sporting the firm’s trademark bright orange T-shirt, frantically collect packed grocery orders to deliver them nearby, while others return to tackle another shipment assigned on their app and waiting.

  “Ideally, one needs to get done with the entire [pickup] process in 1 minute, 30 seconds,” Swiggy warehouse manager Prateek Salunke said.

  

  Swiggy staff prepare to deliver orders in New Delhi on May 6.

  Photo: Reuters

  Swiggy warehouses are mushrooming across India to deliver everything from milk and bananas to condoms and roses within minutes — a business model that is reshaping how Indians shop.

  It is also threatening millions of mom-and-pop stores that for decades dominated the grocery trade in a country where big supermarkets are relatively scarce and are located in more affluent neighborhoods or malls.

  Indians long relied on visits to small neighborhood outlets for groceries or got free deliveries from them via phone orders, before the rise of e-commerce triggered by Amazon.com Inc and Walmart Inc’s Flipkart over the past decade.

  However, the US giants, which offer location-dependent same-day or next-day delivery, are not as fast with groceries as Swiggy and its rivals Zepto and Zomato’s Blinkit, which are ushering a “quick commerce” boom.

  Goldman Sachs in April said that quick deliveries accounted for US$5 billion, or 45 percent of India’s US$11 billion online grocery market.

  As shoppers prioritize convenience and speed, quick commerce would account for 70 percent of the online grocery market set to touch US$60 billion by 2030, it forecast.

  IPO-bound Swiggy started as a restaurant food delivery business in 2014 and is valued at US$10 billion, but it is now switching gears to bet more on the “last-minute” grocery business in India, the world’s third-largest retail market after China and the US.

  “We are training our guns to focus on a market much larger than food,” a confidential Swiggy strategy document seen by Reuters said of its Instamart service in December last year.

  Its target is “21-35 year old, time-starved urban consumers who value convenience,” the document said.

  Swiggy did not respond to requests for comment on the document or its broader strategy.

  The company doubled its warehouse count to 500 in 25 cities last year and has plans to increase it to 750 before April next year, said an executive at one of Swiggy’s financial investors, which also include Prosus NV, the Qatar Investment Authority and the Government of Singapore Investment Corp.

  Globally, COVID-19 lockdowns spurred fast-delivery start-ups, helping the likes of Turkey’s Getir to expand, only to see the interest dissipate as shoppers returned to physical outlets afterward.

  India is witnessing a different trend.

  Sumat Chopra, a partner at consultancy Kearney, said quick commerce firms are benefiting from availability of cost-effective warehousing space and “pampered” Indian consumers’ long-time habit of ordering just a few items from neighborhood stores by phone.

  Swiggy would even take an order for a single mango, although it could cost about twice as much as walking to a nearby shop.

  Many consumers are willing to pay up to save time.

  Mumbai lawyer Natasha Kavalakkat, 27, who has a hectic daily schedule, uses quick delivery apps such as Swiggy and Zepto to order apples and bread. She said getting juice packs delivered within minutes just before a party was a game-changer.

  “This is too convenient,” she added.

  However, the rise of quick commerce means many smaller retail stores are reeling under pressure.

  Suburban Mumbai grocer Prem Patel’s business had thrived over the past few years, enabling him to refurbish his store and install air-conditioning.

  He is not happy anymore.

  “No one buys milk from malls and supermarkets. That was our uniqueness, but these apps have changed the game,” said Patel, whose daily sales have halved to about 25,000 rupees (US$299).

  Four retailer associations in four Indian states, representing 90,000 grocery shops of the country’s estimated 13 million, said that monthly sales were dropping by 10 to 60 percent for some due to the rise of quick commerce apps.

  Some traditional stores are responding by becoming more tech-savvy.

  Hiren Gandhi, who chairs a retail association in Gujarat state, has asked members to create WhatsApp groups to take orders and deliver goods quickly in a 6.4km radius.

  “Around 500 stores have taken steps to innovate and sustain their business,” he said.

  Analysts have said that reliance only on big urban cities to lure customers and high spending on promotional discounts and marketing that keeps profits at bay could prove risky for quick commerce firms in the low-margin groceries business.

  However, Swiggy and Blinkit are already diversifying beyond groceries into higher-margin products.

  On Swiggy’s app, shoppers can order fitness products and electronics such as a US$132 Xiaomi air purifier, while Blinkit said it sold a record number of roses, bouquets and teddy bears in a single day on Valentine’s Day in February.

  Swiggy’s Instamart was launched as an “Indian version of 7-Eleven (on the cloud),” but “we are changing our positioning” to an “online Supermarket,” the company’s internal document said.
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