Swiggy Stores to take on online grocers Grofers, BigBasket and Dunzo

Food-delivery start-up Swiggy on Tuesday said it would deliver groceries through its new service, Swiggy Stores. The Naspers-backed firm has recently raised $1 billion. The foray into hyperlocal deliveries will place it in competition with Amazon and Flipkart as well as online grocers such as BigBasket, Grofers, and Google-backed Dunzo.

Swiggy is already piloting the initiative in Gurugram. For this, it has tied up with 3,500 local stores and merchants such as Ferns N Petals, Le Marche, Needs Supermarket, Licious, Zappfresh, TheMomsCo, Apollo, and Guardian Pharmacy.

Valued currently at $3.3 billion, the company plans to launch the service across all major cities in the country, said a source at Swiggy who did not want to be named.

“We can confidently say we bring convenience to the doorstep of consumers across the country,” said Swiggy co-founder and Chief Executive Officer Sriharsha Majety in a blog post on Tuesday.

Announcing the new initiative, he said, “Just like how we democratise seamless delivery across over… (millions of) restaurants in the country, we can democratise convenience.”

Bengaluru-headquartered Swiggy now plans to deliver fruit and vegetables, groceries, baby-care products, as well as health products and supplements. Deliveries are expected to be completed within an hour.

Currently, the company — also backed by Tencent — conducts 28 million transactions each month, across 80 cities. It has a fleet of 125,000 delivery partners.

Retail space

Of the entire retail market in the country, grocery comprises 60 per cent. Analysts estimate its size would be anywhere between $400 billion and $600 billion currently. It has the potential to cross $700 billion by 2022, according to Knowledge@Wharton, an online business analysis journal of the Wharton School, University of Pennsylvania.

According to RedSeer Consulting, the online grocery segment in the country is relatively small, at $1.5 billion. However, it has the potential to grow to $7 billion by 2022.

Road ahead

Analysts, however, are divided on whether Swiggy’s new initiative will be beneficial to the company in the long run.

Rohan Agarwal, an engagement manager at RedSeer Consulting, said by using its delivery fleet to serve other types of requirements, Swiggy can maximise customer value. “The transaction volume one can expect is huge. The business opportunity is huge, given that you already have a base of customers and an operational set-up,” he said.

Satish Meena, a senior forecast analyst at Forrester Research, however, disagreed.

The challenge for such a service is that every item a customer wants will not be available in the same grocery store, he said, adding: “In 2015, companies went hyperlocal. But it was not good business at the costs they were incurring.”

Meena said Swiggy would benefit from its fleet of delivery partners. “How much volume they can generate, will the main criteria.”

He also said ordering a plate of food was different from ordering groceries for which one needs to plan. “Sometimes you may forget to buy salt. The low-ticket orders may not justify the cost (on delivery).”

Swiggy said merchant partners would benefit from increased volumes and also access to customers who were out of their ambit.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.