Food Delivery Startup Swiggy To Foray Into Hyperlocal Segment, Starting With Medicines And Groceries

Bengaluru-based online restaurant search and food delivery startup Swiggy is reportedly looking to foray into the hyperlocal vertical, particularly the medicine and grocery categories. The move, sources have revealed, is geared towards boosting the company’s overall volume.

Reportedly dubbed as “Dash”, the hyperlocal service will be launched as a pilot in some categories over the coming months.

Commenting on the development, a person in the know told ET, “While several categories have been discussed, they may start with medicines and then move on to groceries.”

As per the source cited above, Swiggy, through the new service, is aiming to better utilise its over 30,000-strong workforce, while also enhancing cost optimisation especially during the lean hours of the day (i.e. from 2 pm to 6 pm).

In response to Inc42’s queries, a spokesperson for Swiggy said, “At Swiggy, we’re continuously experimenting with ways in which we can enrich the lives of our consumers and partners by making it more convenient and hassle-free.”

Incidentally, the development comes less than a week after reports surfaced that the Naspers-backed food delivery platform is talks with Hong Kong-based VC firm, DST Global, for a possible investment.

The proposed funding round from DST Global will reportedly entail the infusion of over $200 Mn in Swiggy and will also see the participation of New York-headquartered technology hedge fund Coatue Management.

According to earlier reports, Coatue is gearing up to pump $50 Mn-$100 Mn in the Benglauru-based foodtech company. If the talks between Swiggy and DST Global materialise, the former’s valuation is expected to cross $1 Bn, which will in turn put it in the coveted unicorn club along with rival Zomato and others.

Swiggy: A Journey Of Hurdles And Success

Founded in August 2014 by Sriharsha Majety, Nandan Reddy, and Rahul Jaimini, the platform is currently functional in over eleven cities, including Delhi, NCR, Mumbai, Pune, Hyderabad, Kolkata, Bengaluru, Chennai, Ahmedabad, Jaipur, and Chandigarh. As per industry estimates, it boasts about 7 Mn monthly orders from over 35,000 restaurant partners, compared to Zomato’s 5.5 Mn orders in the month of March.

Headquartered in Bengaluru, the food delivery startup has raised a total of $255 Mn+ in funding till date. By contrast, Zomato has secured around $444 Mn in funding so far.

Swiggy’s last fundraise in February saw the participation of a new investor Meituan-Dianping, which is one of China’s largest service ecommerce platform. Of the total $100 Mn investment, Meituan-Dianping reportedly contributed $40 Mn, while the rest came from Naspers.

Prior to the $100 Mn Series F funding, the food delivery company raised $80 Mn in a round led by Naspers at an estimated valuation of $400 Mn in May 2017. Earlier in September 2016, Swiggy picked up $15 Mn (INR 100 Cr) Series D funding led by US-based venture capital firm Bessemer Venture Partners and other existing investors.

Over the last one year, Swiggy has attracted a ton of investor interest from biggies like SoftBank, Alibaba, Naspers, Flipkart and Tencent.Reports of Flipkart initiating acquisition talks with Swiggy first surfaced in October 2017, when it was said that the homegrown ecommerce player was gearing up to diversify its business through acquisitions and investment.

Later in November, The Ken reported that Flipkart was preparing for a possible infusion of $50 Mn in Swiggy. Tencent, whose portfolio includes firms like Practo, Ola, Flipkart and Hike, might also follow the investment round with Flipkart in the Bengaluru-based foodtech startup, the report further stated.

Around the same time, it was said that Japanese conglomerate SoftBank is was gearing up for a $200 Mn-$250 Mn investment in the foodtech startup.

Swiggy Slowly Expanding Its Product Portfolio To Challenge Zomato

With the aim of strengthening its market leadership position and solving existing supply gaps in the marketplace, Swiggy has been introducing a host of unique and advanced products and services in recent times.

From cloud kitchen to introducing new supply chain, Swiggy has been aggressively working to promote its market share in this segment. Over the last several months, Swiggy has launched a slew of new initiatives including Swiggy Access, long-distance deliveries and Capital Assist to help restaurants serve consumers in new and more powerful ways.

The company also strengthened its senior leadership with several additions to the team including those from the recent acqui-hire of gourmet food startup 48East. It also underwent a revamp, making it more intuitive and personalised to each consumer.

In its endeavour to bolster its online food delivery service against rival Zomato, the company unveiled a new service, Swiggy Scheduled, in February 2018. Swiggy Scheduled will enable users to plan and order their meals for lunch, dinner, breakfast, or party menus in advance.

Earlier this month, it partnered with ICICI Bank to roll out two convenient and hassle-free digital payments solutions for its delivery partners. Under this partnership, Swiggy’s delivery partners can use a Unified Payment Interface (UPI)-based solution for instant fund transfers on-the-go or choose to deposit cash at automated Cash Deposit Machine (CDM) available at  ICICI Bank branches and ATM locations.

In another similar move, the online food delivery giant joined hands with Flipkart-owned PhonePe recently, as part of which the technology and product teams at Swiggy and PhonePe have collaborated to build a one-tap checkout flow for the former’s users.

As a result of its continued focus on strengthening its product portfolio, Swiggy posted a record increase of 500% in revenues in FY17 and saw order volumes nearly double since its previous funding in May 2017. As of now, Swiggy claims its average delivery time as an industry benchmark of under 35 minutes.

The country’s hyperlocal market is poised to touch $345 Mn by 2020, as per a report by Ken Research, titled “India Hyperlocal Market Outlook to 2020 – Driven by Rising Startups Firms and Fluctuating Investments”. If Swiggy decides to enter this segment, it will face direct competition from established players like Grofers and BigBasket in the grocery category and 1mg, PharmEasy and others.

However, with a formidable opponent like Zomato in the food delivery sector, Swiggy’s decision to foray into hyperlocal services will likely give it an edge over its equally well-funded rival.