Swiggy Not Focusing On Entering New Cities For Food Delivery Business

Foodtech major Swiggy is focusing on deepening its presence in the existing cities and not on geographic expansion, as the food delivery business has reached a saturation point in terms of number of cities.

In its earnings call, after it declared its financial results for the second quarter of FY25, the company underscored that expanding into an additional 50-100 cities is no longer justified by business potential. 

“Expanding to an additional 50 or 100 cities would largely be a vanity exercise, as there isn’t a meaningful business case in those areas,” the company said. 

Instead, Swiggy is prioritising growth in high-potential urban areas with rising migrant populations and emerging communities, like the new areas around Delhi NCR and Bengaluru. 

“Cities like NCR and Bengaluru are no longer limited to their core areas. Expansion into surrounding zones, which we call Tier 1.5 areas, is becoming increasingly relevant as new consumers in these regions seek affordability,” Swiggy CEO Sriharsha Majety said. 

With core city rents increasing, affordability remains a key driver, especially for segments like daily corporate lunches, where optimising delivery speed by distance is crucial, he added.

Meanwhile, for its quick commerce vertical Instamart, Swiggy is looking to meet growing consumer demand for greater selection. However, balancing this with delivery speed remains a challenge. 

According to the company, while customers expect an extensive range of products, Swiggy’s operating model currently supports delivering up to 20,000 SKUs within 10 minutes. 

“If we aim to expand the assortment beyond this range, we would need to make a small trade-off by extending the delivery time,” said Majety. 

Last month, Swiggy CFO Rahul Bothra told Inc42 that the new dark stores that the company will operate 

will largely have an area equivalent to 2-3 times of the company’s current dark stores. “This will not only increase our SKU coverage, but also support assorted deliveries — i.e we can deliver some products in 10 minutes and others within 20 minutes,” Bothra said.

Swiggy today reported a 4.78% year-on-year decline in its consolidated net loss to INR 625.53 Cr, while operating revenue zoomed 30% to INR 3,601.45 Cr.

Swiggy Instamart saw its operating revenue surge 135.7% to INR 490 Cr in the quarter ended September 2024 from INR 208 Cr in the year-ago period.

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