In a suburban neighborhood of Mumbai, workers at SoftBank-backed Swiggy‘s grocery warehouse, hustle to fulfill orders within a 10-minute window. Their efficiency is monitored by a digital display, which flashes red alerts for any lag in pace.
Out in the scorching heat, Swiggy’s bikers, clad in the company’s distinctive bright orange T-shirts, hurriedly gather packed grocery orders for nearby delivery. Meanwhile, others head back to handle another shipment already assigned on their app and awaiting attention.
“The goal is to ideally complete the entire pickup process within 1 minute and 30 seconds,” warehouse manager Prateek Salunke emphasized.
The Evolution of Indian Shopping Habits
Swiggy’s warehouses are proliferating across India, facilitating the swift delivery of a wide array of items, from milk and bananas to condoms and roses, all within minutes. This business model is fundamentally transforming the way Indians approach shopping.
The rise of Swiggy’s model also poses a threat to the millions of mom-and-pop stores that have traditionally dominated the grocery trade in a country where large supermarkets are few and far between, often found in more affluent neighborhoods or malls.
Before the surge of e-commerce driven by Amazon and Walmart’s Flipkart over the past decade, Indians heavily depended on visits to local neighborhood shops for groceries or enjoyed free deliveries through phone orders.
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However, the American behemoths, providing location-dependent same-day or next-day delivery, don’t match the speed of Swiggy and its competitors Zepto and Zomato‘s Blinkit in the realm of groceries. These players are spearheading a “quick commerce” boom.
In April, Goldman Sachs stated that quick deliveries represent $5 billion, comprising 45% of India’s current $11 billion online grocery market. With shoppers increasingly valuing convenience and speed, quick commerce is expected to encompass 70% of the online grocery market, projected to reach $60 billion by 2030.
Infrastructure Expansion and Operational Insights
IPO-bound Swiggy, which began as a restaurant food delivery business in 2014 and is currently valued at $10 billion, is now pivoting its focus towards the “last-minute” grocery sector in India. This move comes as India emerges as the world’s third-largest retail market, following China and the United States, offering immense potential for growth in this segment.
“We are redirecting our efforts towards a market far beyond food,” stated a December 2023 confidential Swiggy strategy document, referencing its Instamart service.
Its aim? “To cater to time-starved urban consumers aged 21-35 who prioritize convenience,” the document outlined.
Swiggy did not provide any response to inquiries regarding the document or its overarching strategy.
The company, as reported by an executive from one of Swiggy’s financial investors, which also include Prosus, Qatar Investment Authority, and Singapore’s GIC, doubled its warehouse count to 500 in 25 cities last year. Plans are underway to further increase this number to 750 by April 2025.
Consumer Behavior and Preferences
On a global scale, the COVID-19 lockdowns provided a boost to fast-delivery startups, facilitating the expansion of companies like Turkey’s Getir. However, this interest dwindled as shoppers gradually reverted to physical outlets following the pandemic. Luxembourg-based Jokr, for instance, scaled back its operations in the U.S. market in 2022.
A distinct trend is unfolding in India.
According to Sumat Chopra, a partner at consultancy Kearney, quick commerce firms are capitalizing on the availability of affordable warehousing space and the entrenched habit among Indian consumers of ordering small quantities from nearby stores over the phone.
Swiggy will accept orders for even a single mango, albeit at a cost roughly double that of purchasing from a nearby shop in person.
Many consumers are willing to pay extra to save time.
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Natasha Kavalakkat, a 27-year-old lawyer from Mumbai with a busy daily routine, relies on quick delivery apps such as Swiggy and Zepto to purchase essentials like apples and bread. She highlighted the convenience of having juice packs delivered within minutes, especially just before hosting a party, as a significant game-changer.
“This is incredibly convenient.”
The emergence of quick commerce is placing significant pressure on many smaller retail stores.
Prem Patel, a grocer in suburban Mumbai, had experienced thriving business in recent years, enabling him to renovate his store and add air conditioning. However, he no longer finds satisfaction in his situation.
“Our unique selling point used to be that no one bought milk from malls and supermarkets. However, these apps have completely altered the landscape,” Patel remarked, noting that his daily sales have plummeted by half to approximately 25,000 rupees ($300).
Four retailer associations in four Indian states, representing 90,000 grocery shops out of the country’s estimated 13 million, reported monthly sales declines ranging from 10% to 60% for some, attributed to the surge of quick commerce apps.
Some traditional stores are adapting by embracing technology.
Hiren Gandhi, who heads a retail association in Gujarat state, has advised members to establish WhatsApp groups for swiftly taking orders and delivering goods within a 6.4-km (4-mile) radius.
“Around 500 stores have taken proactive steps to stay ahead and ensure the sustainability of their businesses,” he said.
Financial details of Swiggy’s Instamart quick commerce division are not publicly available. However, according to an internal document, its annualized order value surged from $340 million in December 2021 to $1 billion by September of the following year. Nonetheless, the business remains unprofitable, as indicated by an executive at Swiggy’s investor.
Competitive Landscape and Business Strategies
Swiggy’s main competitor, Zomato, is India’s biggest food delivery business but acquired quick commerce company Blinkit in 2022. Goldman Sachs said Blinkit is more valuable to Zomato than food delivery and is forecast to post orders worth $2.7 billion this year, nearly 60% higher than estimated last year.
In a regulatory disclosure in May, Zomato announced that Blinkit had achieved profitability for the first time. However, it anticipates that its operating profit will remain “around zero” for the next several quarters. Despite this, Zomato did not provide any additional comments upon request.
Analysts caution that relying solely on major urban centers to attract customers and excessive spending on promotional discounts and marketing, which limits profit margins, could pose risks for quick commerce firms operating in the low-margin groceries sector.
However, both Swiggy and Blinkit are already expanding their offerings beyond groceries to include higher-margin products.
Through Swiggy’s app, customers can now purchase fitness products and electronics, including items like the $132 Xiaomi air purifier. Meanwhile, Blinkit reported record-breaking sales of roses, bouquets, and teddy bears on Valentine’s Day in February.
Swiggy’s Instamart was initially introduced as an “Indian version of 7 Eleven (on the cloud),” as per its internal document. However, the company is now adjusting its positioning to that of an “online Supermarket.”
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