Quick Commerce to Go Slow on Expansion, Control Dark Store Count in H2, Says HSBC

Quick Commerce to Go Slow on Expansion, Control Dark Store Count in H2, Says HSBC

SUMMARY

After a period of intense competition and a frenzy of dark store openings, Zomato’s Blinkit, Swiggy Instamart, and Zepto are expected to slow down on expansion

HSBC remarked that the speed of the quick commerce sector in the country has started decelerating

The brokerage predicts new store additions will start to moderate in the second half of this year, where quick commerce players are expected to prioritise profitability over market share

Brokerage HSBC Global Research has reportedly said in a note that the massive addition in dark store count has hurt the bottomline across the quick commerce sector because of which it expects giant players to go slow on their expansion plans.

After a period of intense competition and a frenzy of dark store openings, Zomato’s Blinkit, Swiggy Instamart, and Zepto are expected to slow down on expansion, NDTV Profit reported, citing the HSBC research note.

HSBC remarked that the speed of the quick commerce sector in the country has started decelerating, NDTV Profit said.

The report further said that HSBC predicts new store additions will start to moderate in the second half of this year, where quick commerce players are expected to prioritise profitability over market share, and start optimising the existing store capacity and improving efficiency.

With the primary goal to gain the edge in simmering competition, each of these quick commerce players such as Zepto, Swiggy Instamart and Zomato’s Blinkit have been investing in the launch of similarly new features such as the 15-minute food delivery service via their new offerings.

These companies have also channelled their focus in entering Tier 2 and 3 regions, with new dark store additions from the past few months, which has evidently threatened their bottomline.

Zomato’s quick commerce arm Blinkit’s third quarter adjusted EBITDA loss, for example, surged 15.7% from INR 89 Cr in Q3 FY24, which Zomato CEO Deepinder Goyal attributed to the rise in upfront investments made by the quick commerce arm.

Because of this investment, the CEO then said, Blinkit is likely to achieve its target of opening 2,000 dark stores by December 2025.

In a post-earnings call, Goyal also said that the company believes that smaller cities are attractive on a RoI basis for Blinkit, and it will see a large portion of its new dark stores come up in smaller cities in the next year or so.

“We believe we are near the peak of this super expansion strategy,” said the report citing HSBC’s note. “We are likely to see moderation in this expansion strategy this year. Even Blinkit may not end up opening 1,000 stores this year.” 

Shares of Swiggy slumped about 3% at INR 447.65 apiece on the BSE intraday trading session, as of 1:30 PM on January 24, compared to its previous close of INR 461.35.

Zomato, meanwhile, traded down 1.17% at INR 219.30 as against its last close of INR 221.90 on January 23.

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