Blinkit’s Latest Gambit


Zomato’s history of abandoned experiments has not stopped it from trying one more with Blinkit

Ignore history at your own peril or be condemned to repeat it. As one of the most self-aware startups in India, Zomato is more than likely to be familiar with its past, but the Deepinder Goyal-led company’s evergrowing penchant for new experiments, including at Blinkit, says otherwise.

Zomato’s track record of abandoned pilots and launches has not stopped it from trying one more, very much in line with the company’s startup DNA. Now it’s Blinkit’s turn to enter the lab with the plans to add Urban Company-like hyperlocal services to the loss-making quick commerce operations.

Can this prove to be the magic bullet to boost Blinkit’s unit economics or will these plans join the hall of Zomato’s failed past experiments? Before we take stock of the new future for Blinkit today, take a detour through some of our biggest stories this week:

Blinkit’s Big Bet

Quick commerce delivery and at-home repair services. On the face of it, these are two very different categories, but Goyal and Zomato are betting that Blinkit can bridge these two disparate worlds. As per reports, Blinkit will look to fulfil these services in 10-15 minutes similar to quick commerce.

While not as fleshed out as Urban Company’s model, Blinkit is looking to offer handyman services for plumbing, electrical and AC repairs. It’s already said to have a team in place with new and existing employees for the hyperlocal services vertical.

Interestingly, Zomato CEO Goyal had a short stint as an independent director on the Urban Company board for 10 months till he resigned on February 15, 2023, two weeks before reports emerged about Blinkit’s new foray.

Zomato’s Quick Experiments

This is of course not the first set of experiments by Zomato or indeed Blinkit, which launched printout deliveries last year, and also its recent entry into delivery of electronic and other high-value products from retail stores.

Plans to venture into at-home services come on the heels of Blinkit’s ‘Brand Stores’ launch, which offers a mini storefront for D2C brands, similar to Swiggy Minis.

Essentially, Blinkit is becoming the bucket under which Zomato is expanding its ecommerce presence and it’s more proof of the company’s ‘Zomatoverse’ vision, which started with investments in Shiprocket, Magicpin, Curefit and others.

Zomato itself has tried many such experiments and abandoned them including the likes of Zomato Wings which it wound down in under a year. The food delivery giant had looked to launch grocery delivery service twice — in 2020 and in 2021 — before acquiring Blinkit. It had also forayed into private label nutraceuticals which it shut down within six months.

Of course, this is in addition to the company entering new markets in the years before its public listing and then pulled out after the IPO in a bid to get leaner.

Given this track record, how seriously can one take the latest bet? If hyperlocal services proves to be a costly foray, Zomato might well be forced to pull the plug on it, because it is also keeping Blinkit’s loss-making ship afloat for now.

Rivals Quick On The Draw

Blinkit’s plans are in line with the idea of maximising the revenue it earns from each user, but the question is will the company drift too far away from its quick commerce roots, which also requires a lot of capital investment?

Indeed, the face of quick commerce is changing too. In just under two years, the 10-minute delivery promise has faded and some of the leaps of unit economics taken during the pandemic have been scaled back.

For instance, last November, Dunzo shut down a few dark stores across cities to optimise costs. The Reliance Retail-backed company is said to have shuttered 25%-30% of its dark stores in Delhi NCR and Hyderabad, which are two of the biggest markets for platforms such as Blinkit, Swiggy, Dunzo and Zepto.

Mumbai-based Zepto, on the other hand, tried to add instant food to quick commerce under the Zepto Cafe brand, which it launched in April. But since then its plans in this regard have developed slower than expected. The company raised more than $350 Mn on the back of the 10-minute delivery promise, but it has silently changed its tack, like others in the biz.

According to the chief product officer and cofounder of a cloud kitchen startup, metros bring in the most order volume for quick commerce, but they also have the highest competition.

There’s little loyalty among the user base, the CPO said, adding that the situation is similar to the heydays of ecommerce when Flipkart and Amazon had Snapdeal, Paytm Mall and others to contend with.

The slow funding environment has complicated plans for quick commerce startups who need constant refuelling to keep customers engaged and coming back, and indeed to expand the dark store network. As ever in the case of loss-making startups, VC funding is critical for these experiments and horizontal expansion to work.

Some in the business such as Tata-owned BigBasket CEO Hari Menon claim each dark store needs at least 800 daily orders to break even. Starting out as a traditional grocery delivery players, BigBasket has slowly ramped up its quick commerce play since 2021, and reported revenue of INR 7,078 Cr in FY22, up from INR 6,065 Cr in FY21.

Core Blinkit Biz Flounders

Plans to jump into the at-home hyperlocal services market come at a time when Blinkit continued to show big losses, despite a growth in order volume in the most recent quarter. In Q3 FY23, Blinkit’s order volume grew by 21% quarter-on-quarter (QoQ) to 3.16 Cr, offsetting the 2.6% slump in average order value (AOV) to INR 533. Blinkit’s adjusted EBITDA loss improved to INR 227 Cr in the quarter from INR 259 Cr in Q2.

The AOV drop was said to be a result of the macro slowdown, which led to smaller cart sizes, the company said. But Blinkit CEO Albinder Dhindsa was optimistic that the company could build a profitable business at an AOV 20% lower from the current level.

Dhindsa also revealed that Blinkit plans to add 40% more dark stores in the next year, while acknowledging the cost burden associated with this expansion.

Which brings us to Zomato’s Blinkit burden and how the company is looking to eke out higher margins and lower costs on the food delivery side to support the quick commerce needs.

The food delivery business is reportedly asking restaurant partners to increase their marketing spends (up to 5% of revenue from Zomato) and bear the cost of cancellations. Further, Zomato is reportedly in discussions to charge restaurant chains 6% higher commissions as well owing to rising losses and pressure to become profitable.

Zomato’s push towards fixing the unit economics situation comes as CEO Goyal believes the company could achieve an ambitious target of $100 Bn in revenue and profit of over $1 Bn by 2030.

“It remains a challenging demand environment, but we are seeing green shoots of demand coming back in recent weeks, which makes us believe that the worst may be behind us,” CFO Akshant Goyal said during the Q3 earnings call.

But the Blinkit puzzle is only set to get more complicated with the addition of the Urban Company-like model, which Urban Company itself has yet to show profits in. Having served on the UC board, Goyal would be more than familiar with the challenges in this model too.

Urban Company earned INR 437 Cr in FY22 from operations on a consolidated basis. However, the company racked up a massive loss of INR 514 Cr in the same fiscal.

The fact is that Blinkit will need a major cash infusion from Zomato to take on Urban Company, which has a head start as far as fine-tuning the product-market fit and unit economics. How long will Zomato keep paying the way for Blinkit?

Sunday Roundup: Startup Funding, Tech Stocks & More

Funding Activity in 2023

? Weekly Funding Plummets: After hitting a 94-week low the previous week, Indian startup funding saw a minor uptick, but this is still far off the weekly pace we have seen in the years past. Overall, startups raised $178 Mn across 18 deals in the past week.

✨ 30 Startups To Watch: The February 2023 edition shines the light on early-stage startups tapping the enterprisetech, ecommerce and fintech opportunity.

? Founders Moving On: It was a strange week with cofounders of several major companies stepping away from their roles. Freshworks cofounder and CTO Shanmugam Krishnasamy has left the company following similar exits at The Moms Co and Treebo, in addition to Freecharge MD and CEO’s departure.

? Nykaa Downside: Brokerage firm Macquarie initiated its coverage on Nykaa, flagging profitability concerns and setting a target price of INR 115, a 15% downside on the stock’s close this week.

Indian Tech Stocks Fared This Week

? Crypto Under Money Laundering: The Indian government issued a notification this past week to bring cryptocurrency and virtual digital assets transactions under the anti money laundering rules.

We’ll be back next Sunday with more insights and another roundup of the top stories from the world of Indian startups. Of course, you can follow us on Instagram, Twitter and LinkedIn for the latest news as it happens.

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