Blinkit To Open More Dark Stores In Smaller Cities: Zomato CEO

Blinkit To Open More Dark Stores In Smaller Cities: Zomato CEO

SUMMARY

Foodtech major Zomato is now looking to open more dark stores for its quick commerce arm in smaller cities over the next year

Zomato CEO Deepinder Goyal said that the company believes that smaller cities are attractive on a RoI basis for Blinkit

80% of the company’s business comes from the top eight cities, according to Goyal

Large cities continue to bring in the largest chunk of revenue for Blinkit, but foodtech major Zomato is now looking to open more dark stores for its quick commerce arm in smaller cities over the next year.

In a post-earnings call, Zomato CEO Deepinder Goyal said that the company believes that smaller cities are attractive on a RoI basis for Blinkit.

As a result, the quick commerce arm, which is on a store expansion spree, will see a large portion of its new dark stores come up in smaller cities in the next year or so.

“… I think once we build some fair bit of density in these smaller cities, we would (be in a position) to publicly share more data about how these cities are any different, if at all, from the larger cities,” quipped Goyal. 

Notably, 80% of the company’s business comes from the top eight cities, according to Goyal. 

For the quarter ended December 2024 (Q3 FY25), Blinkit saw its adjusted EBITDA loss increase 13X to INR 103 Cr from INR 8 Cr in Q2 FY25. 

On a YoY basis, the adjusted EBITDA loss increased 5.7% from INR 89 Cr. 

According to Goyal, the quarter under review was one of the most “intense quarters” compared to previous 10 quarters, which also led to more marketing expenditure by the end of the quarter due to high competition in the market. 

In the company’s shareholders’ letter, Blinkit chief Albinder Dhindsa said that “the biggest impact of the intensifying competition has been the acceleration in customer awareness and adoption of quick commerce”.

Dhindsa further explained that the company noticed a similar trend in the initial days of the food delivery business as well. According to him, the high competition converts to higher investments in customer acquisition across the industry as a whole. 

“This eventually (disproportionately) benefitted players with sustained good quality execution,” said Dhindsa. 

Further, he said that the high competition led to a pause in margin expansion in the business during the quarter under review. However, he called it a temporary phenomenon. 

“So far, we have not seen any attrition of our core customers which tells us that customers are continuing to choose Blinkit over other options,” he added. 

Notably, Blinkit’s customer retention rate has remained almost flat over the past eight quarters, ranging from 42% to 44%. 

Meanwhile, Zomato saw its consolidated net profit slump 57.2% to INR 59 Cr in Q3 FY25 from INR 138 Cr in the year-ago quarter due to a slowdown in the food delivery segment and rising competition in quick commerce.

On a sequential basis, profit declined 66% from INR 176 Cr.

Shares of Zomato ended Monday’s (January 20) trading session 3.14% lower at INR 240.95 on the BSE.

Editor’s Note: The story has been edited to correct the increase in adjusted EBITDA loss.

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Blinkit To Open More Dark Stores In Smaller Cities: Zomato CEO-Inc42 Media
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