Moderating Dark Store Additions Likely To Help Zepto Contain Q4 Quick Commerce Burn: JP Morgan

While Zomato-owned Blinkit and Swiggy Instamart are accelerating the pace of dark store network expansion, IPO-bound Zepto is slowing down, which suggests a potential easing in competition intensity in India’s quick commerce market, JP Morgan said. 

In a recent research note, the global brokerage firm said that both Blinkit and Instarmart added over 150 dark stores over the January-February period, while Zepto saw its dark store additions moderating.

“Our calculations suggest Blinkit & Swiggy are tracking ~250 store additions for 4QFY25 while Zepto is sharply slower,” analysts at JP Morgan said. They argued that this could suggest “peaking competition intensity” in the quick commerce market, which they said is positive for Zomato and Swiggy. 

Slower dark store expansion by Zepto may also imply lower marketing for new user acquisition, which could help the Aadit Palicha-led company keep its quick commerce burn contained in the March quarter of the ongoing fiscal year (Q4 FY25), as per JP Morgan.

This comes days after Zomato cofounder and CEO Deepinder Goyal claimed Zepto alone accounted for half of quick commerce industry’s quarterly burn of INR 5,000 Cr, stirring up controversy. Unsurprisingly, Palicha refuted these claims.

The brokerage estimated that Blinkit currently operates the biggest dark store network in the country with an estimated total of 1,229, edging out Zepto, which runs 1,147 dark stores.

At first blush, it might appear that Blinkit and Zepto are neck to neck in terms of their dark store presence. However, JP Morgan pointed out that both Blinkit and Instamart have widened their footprint in tail cities, whereas Zepto has gone deeper in the top 5 cities.

“Even though Zepto has the higher number of stores as compared to Instamart, it has the least number of cities with more than 5 dark stores, highlighting a more concentrated presence,” the brokerage said.

JP Morgan estimates that Blinkit has about 20% of its dark stores in tail cities, while Instamart and Zepto have 22% and 12% of their footprints in these cities, respectively.

In its Q3 FY25 post earnings call, Zomato cofounder and CEO Deepinder Goyal had said that Blinkit would add more stores in smaller cities over the next year.

JP Morgan’s analysis showed that Zepto and Instamart are over-indexing in Southern India, whereas Blinkit’s presence is more profound in northern cities such as Delhi NCR, Kolkata, Jaipur and Lucknow.

While Blinkit is on track to reach its target of 2,000 dark stores by year-end, Swiggy is expected to achieve its target of 1,000 dark stores by Q4 FY25, as per the brokerage.

In a separate report, IIFL Capital underlined that established players such as Blinkit, Instamart and Zepto have significantly reduced their discounts. Rising competition in the sector with the entry of new players such as Flipkart Minutes and Amazon Pay will likely lead to more aggressive discounting, the brokerage said.