Indian foodtech unicorn Swiggy, after having scaled up its grocery delivery service Swiggy Stores earlier this year, has now launched InstaMart, a delivery service for groceries and other household items.
“Through Instamart, we want to introduce the convenience grocery category in India. With the fastest deliveries in the segment (30 – 45 minutes), day and night serviceability (7 am – 12 midnight), a wide assortment across categories such as instant meals, snacks, ice creams, beverages, fruits and vegetables, Instamart will address the unmet grocery needs of the time-pressed, convenience-seeking urban consumer,” a Swiggy spokesperson told Inc42.
The company is currently testing the feature in Gurgaon, where it can be accessed through the ‘Instamart’ tile within the Swiggy app.
“We are currently testing Swiggy Instamart to see how it augments our consumer promise of enabling unparalleled convenience by making grocery delivery more instant and delightful.”
While Swiggy already operates ‘Swiggy Stores’, it’s hyperlocal delivery service for groceries and other essentials, InstaMart will see the company operate a chain of ‘dark’ stores to service consumer demand. You can read more about the advent of dark stores and future prospects in India Inc42 ‘‘The Hyperlocal Conundrum: Kiranas Vs Dark Stores In India’s Retail Market Post-Covid’ report.
India’s Online Grocery Delivery Sector
The launch of InstaMart comes after the launch of JioMart, Reliance’s online grocery store which has been launched in 200 cities across the country. JioMart’s facility of free deliveries on all orders, irrespective of the order amount, is expected to give tough competition to the existing players in the ecommerce segment such as Flipkart and Amazon, who are also looking to tap into the demand for grocery delivery services amid the pandemic. The JioMart mobile application, which was launched on the Google Play Store on July 19, has now garnered more than 1 Mn downloads.
Meanwhile, both BigBasket and Grofers witnessed a surge in demand and sales during the lockdown. While BigBasket reported a 35% increase in sales in April, Grofers registered a 60% increase in its gross merchandise value (GMV), compared to pre-Covid-19 levels.
Challenges With Grocery Delivery
However, there are a few challenges inherent in the online grocery delivery model. The commissions in the grocery delivery space aren’t as attractive as compared to what food delivery startups such as Zomato get with the delivery of cooked food. The low order value also makes it very difficult for hyperlocal delivery players to actually make anything substantial out of it. Other problems include stock management as most of the retailers often don’t update the stock while taking orders.
Zomato, which entered the online grocery delivery space in April with the launch of ‘Zomato Market’, wrapped up the business just two months later. This despite the company’s COO of food delivery Mohit Sardana telling Inc42 in April that the company had all the factors in place to sustain the new business model. “Grocery delivery has always been on our long term radar since it fits into our vision of ‘better food for more people’. Given the current need of our customers, we quickly sprung into action to serve,” Sardana had said.
According to sources quoted by The Ken, Zomato decided to shut down the grocery business after finding that the business was not scalable. As food orders had dwindled during the lockdown, grocery seemed to be the way out for Zomato.
US-based market research company Forrester Research has noted that India’s online grocery market could make $3 Bn in sales this year, representing a whopping 76% hike compared to $1.7 Bn last year. The research firm has attributed this growth to the demand for fresh produce and staples during the nation-wide lockdown.