Within two months of its launch, food delivery unicorn Zomato has decided to wrap the grocery delivery arm — Zomato Market — as it lays out the master plan to come out of losses it faced during the lockdown.
In April, Zomato had rolled out grocery delivery business in around 80 cities. Leveraging its technology and fleet network, the company tied-up with several retailers, hypermarket stores and FMCG brands to meet the demand for essential items which had surged due to the lockdown.
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 dwindled in the past few months, grocery seemed to be the way out for Zomato as well as its rival Swiggy. Meanwhile, ecommerce platforms like Shopclues, Club Factory, among others have also started delivering groceries at that time.
In response to Inc42’s queries, a Zomato’s spokesperson said, “We started delivering groceries to offer easy and quick access to essentials in the safest manner possible. Zomato Market will continue to operate and service users who need on-demand delivery of essentials.”
However, the company is now looking to utilise most of the resources for food delivery. “As the country opens up, we are going to spend a large proportion of our time making our food delivery service the safest and the most loved one in town,” Zomato said.
Currently, Zomato is also chasing exclusive deals with restaurants to improve their business that took a body blow due to the pandemic. The company has also doubled down on liquor delivery and is now facilitating the home delivery of alcohol in West Bengal, Odisha and Jharkhand.
Was Grocery Delivery An Opportunistic Play For Zomato?
After launching groceries on the food delivery platforms, both Swiggy and Zomato went into direct competition against Grofers and BigBasket which are synonymous with the home delivery of groceries.
However, during the lockdown, Grofers and BigBasket too faced difficulties in running their businesses. At that time, most of the hyperlocal players were running low on stocks and with no control over inventory and timely product delivery. However, it seemed to be a suitable option to keep operations running.
Moreover, the commissions in the grocery delivery space aren’t as attractive as compared to what Zomato got 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.
Will Swiggy & Others Follow Suit?
Currently, Zomato is the first player which has shut down grocery delivery operations. However, given the challenges, many of the opportunistic players might shut down their grocery stores from their mobile applications.
This might include Zomato’s rival Swiggy among other players like Club Factory, Shopclues, Meesho, among others. Swiggy, however, has something extra than just grocery delivery. The Bengaluru-based startup runs Swiggy Genie on the application which is a hyperlocal delivery service. This service, which helps users to get anything from the nearby store, was launched to compete with Dunzo.