Q-commerce delivery model is plagued by low-ticket size and low margins and has no economics: Ashneer Grover
The 10-minute delivery has no economics and can never be solved through forced low delivery cost, Grover added
Blinkit workers are currently on strike, demanding a minimum fee of INR 25 per delivery order, restoration of earlier incentives and better working hours
Chiming in on the ongoing debate over protesting Blinkit delivery executives, BharatPe cofounder Ashneer Grover has said that the problems with the quick commerce model cannot be solved by forcing low delivery costs.
Taking to Twitter, Grover, who previously was a core team member of Blinkit during its Grofers days, highlighted key issues with the q-commerce delivery model such as low-ticket size and low margins. He also said that the problem with the ‘10-minute’ delivery model was that it had no economics.
“BlinkIt/Zepto – problem is not ₹15 for delivery against ₹50. Problem is 10 Min delivery has no economics – low ticket size and low margin can never be solved through forced low delivery cost. BlinkIt journey : 90 Min (bull run) —> Next day (bear run) —> 10 Min (bull run) —> ??,” Grover tweeted.
Notably, the beleaguered executive led the finance, legal and B2G verticals at Grofers (rebranded as Blinkit) along with cofounders Albinder Dhindsa and Saurabh Kumar.
The tweet triggered an array of responses as many retorted back that there was no need for such superfast deliveries. On the other hand, many tweeted that such issues could be addressed by leveraging economies of scale to reduce delivery costs.
Users also panned the quick-commerce platforms for delaying deliveries, especially during peak hours, and questioned the need for 10-minute deliveries of essentials such as veggies and butter.
The comment comes in the middle of an ongoing stir by Blinkit delivery executives protesting the new payment structure which they say slashes their earnings by nearly three-fourths. Earlier today, Inc42 reported that the delivery drivers met Gurugram Deputy Labour Commissioner Dinesh Kumar and demanded a minimum fee of INR 25 per delivery order. They also sought the restoration of earlier incentives and better working hours.
The operations of Blinkit came to a grinding halt in most parts of Gurugram on April 12 after the company rolled out a new pay structure under which the delivery fee was changed from a fixed amount to a per kilometre basis.
As a result, as many as 100 dark stores of the company were shut across the Delhi-NCR region as users faced inconvenience while ordering items online.
Backing the demands of the drivers, the industry body Indian Federation of App-Based Transport Workers (IFAT) has also now urged the startup to change its stance on the matter and heed to demands of the workers.
Workers’ Strike, Zomato’s Peril
Meanwhile, the protest is likely expected to hit the finances of the parent company Zomato which saw degrowth in its numbers in the third quarter (Q3) of the financial year 2022-23 (FY23). In a research note on April 17, ICICI Securities said that the strike has already cost Blinkit a 1% loss in revenue in Q1 FY24.
While noting that the new pay structure would allow Blinkit to improve its dark store network coverage with limited capex spending, the brokerage firm added that the new system indicated Zomato’s efforts at cost control. However, the firm maintained its BUY rating on Zomato’s stock.
Zomato is already under heat from investors after its consolidated net loss soared to INR 346.6 Cr in Q3 FY23. Its q-commerce vertical contributed adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) loss of INR 227 Cr to the foodtech major’s kitty. At the same time, it improved on most key operational metrics.
Zomato’s grocery unit Blinkit, in an email, said it had introduced a new structure for riders that compensates them based on their effort and was engaging with them to reopen the shut stores.
While Grover’s comments were directed at Zepto and Blinkit, this is not the first that the 10-minute delivery model has landed in controversy. Earlier, Parliamentarians, including Karti Chidambaram and Mahua Moitra, had publicly slammed the superfast delivery model. Last year, as the new model was introduced, Madhya Pradesh Home Minister Narottam Mishra also slammed it saying that the 10-minute delivery model was akin to playing with the lives of gig workers.
