Swiggy is preparing to launch a chain of virtual convenience stores to deliver grocery and household items within 45 minutes, sources told ET, a development that the food app delivery later confirmed.
The launch of InstaMart comes at a time when the Covid-19 pandemic has hastened consumer preference for doorstep deliveries, especially in metros, and as deep-pocketed entrants, including Flipkart Quick, as well as existing players Amazon, BigBasket and Dunzo have heightened focus on this category.
The move has also come amid the entry of Reliance JioMart, which has expanded into 200 cities, a foray that is expected to give stiff competition to established players.
Swiggy plans to offer about 2,500 items from its partner ‘dark stores’, the sources who are aware of its plans said. These dark stores do not have walk-in locations and exist only on its app.
Swiggy’s pilot will begin from Gurugram and will run in Bengaluru subsequently, the people told ET.
Swiggy already operates ‘Swiggy Stores’ which lists products from nearby local stores. Even as that will continue, InstaMart is expected will give it tighter control over the delivery experience and product selection.
“With 30-45 minutes deliveries… day and night serviceability (7 am – 12 am), a wide assortment across categories such as instant meals, snacks, ice creams, fruits and vegetables, Instamart will address the unmet grocery needs of the time-pressed, convenience-seeking urban consumer,” a Swiggy spokesperson told ET.
For consumer internet companies, on-demand delivery — which was a matter of choice before the pandemic struck — has increasingly become a necessity as consumers fear stepping out due to the risk of infection.
“Earlier, a large set of consumers preferred to handpick their grocery items from nearby shops. Now, suddenly, the market is wide open and competitive…It will come down to consumer experience,” said a person in the know.
Swiggy’s key differentiator is its ability to fulfil deliveries in less than half the time it takes for existing players, but the execution will be complex and be key to its success, the person added.
Last month, ET was the first to report that Flipkart would launch 90-minute grocery delivery in Bengaluru, which it did officially last week. Most e-commerce companies Amazon, Dunzo and BigBasket promise delivery in 90-120 minutes. They also have scheduled delivery slots.
“There are about 10 dark stores of 1,800-2,500 sq ft set up in Bengaluru, covering 85-90% catchment areas within a 5-6 km radius,” said another person directly aware of Swiggy’s plans. The average basket size for grocery top-up business is close to Rs 400-450.
Swiggy’s rival Zomato scaled down its grocery delivery business Zomato Market last month, after aggressively pushing it during the first phase of the nationwide lockdown.
For Swiggy, the bet on grocery delivery is happening when its core food delivery business is recovering slowly, to only 50% of pre-Covid-19 levels.
The InstaMart launch will give Swiggy better margins from brands and newer monetization opportunities like banner ads in future, an investor in the firm told ET.
“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 said.
Dunzo, Flipkart, BigBasket, and Amazon also use similar fulfilment models to ensure high fill-rates, at better economics.
Brands are increasingly preferring to work with online players after the outbreak as physical retailing has taken a big hit.
The movement towards home delivery is also heating up globally.
Last week, US-based DoorDash launched its own dark stores called DashMart. And, in China, Missfresh raised $495 million led by China International Capital Corporation. Swiggy investor and China’s largest restaurant delivery platform, Meituan Dianping, added grocery to its offering last year.