What Lies Ahead For Swiggy Instamart After Tepid Q3?

You have to spend money to make money, goes a popular saying and Swiggy seems to be swearing by it. 

Last week, the Bengaluru-based consumer services giant announced its Q3 results, and ever since then, the startup’s share price has nosedived, even reaching a 52-week low. The market seems to have punished the 10-year-old company due to the increase in overall losses, even as revenue growth was muted for Instamart, Swiggy’s growth bet. 

The stock has declined over 12% since the foodtech major reported weaker-than-expected earnings in the December quarter of FY25.

In fact, as of Q3 FY25, Swiggy is at the same level as Zomato-owned Blinkit was one year ago. This shows the road ahead for Swiggy’s Quick Commerce business. 

In Q3, the vertical reported 14% QoQ revenue growth to INR 603 Cr, even as Zomato’s quick commerce business touched INR 1,400 Cr in revenue in the same quarter. So a direct comparison with Blinkit is not justified. 

Instead, let’s look at whether Swiggy can push Instamart to Blinkit’s current scale in a year’s time or even faster. After all, the company is betting big on expansion and will be investing in its dark store network, adding larger megapods and venturing into new products and categories. 

So will Swiggy’s investment into Instamart drive scale? Or is there a deeper problem here, which has put Swiggy in the third place in the quick commerce race, as per some reports, behind Blinkit and Zepto.   

The company’s quick commerce business vertical alone posted a staggering loss of INR 527 Cr, a 70% YoY jump. Essentially, Instamart alone contributed to more than 65% of Swiggy’s losses in Q3. 

In the post-earnings call, Swiggy attributed the higher losses to spiralling customer acquisition costs and investments towards expansion of the dark store network. But the fact is that Swiggy is not the only one doing so. 

Zepto, which raised more than $1.4 Bn last year, has looked to ramp up its dark store network similarly, while Zomato-owned Blinkit too is in investment mode at the moment and has taken its foot off the profitability pedal for the time being. 

But even so, Swiggy’s growth rate is well behind Blinkit — the only other platform for whom we have disclosures from the past year on a quarterly basis. 

For instance, Blinkit’s Q3 FY25 YoY revenue growth rate was 120% in comparison to Swiggy Instamart’s 108%, a marginal difference which is also seen in the QoQ growth rates — 21% for Blinkit vs 17% for Instamart.

One of the primary reasons behind Instamart’s sluggish growth rate could be attributed to its late execution and delay in entering to newer categories.

“Swiggy has always been on the backfoot from the very beginning. The company launched quick commerce first, but was late to enter new categories. In many cases, its rivals were already reaping benefits of this transition before Swiggy. In other cases, Swiggy enters a new region or market late, when already everyone is there,” according to Satish Meena, founder of Datum Intelligence, a consumer data and analytics solutions company. 

Based on the disclosures by both Blinkit and Instamart, these players largely earn revenue from metros and Tier-I cities. So any investments in setting up new dark stores will only pay off one year down the line, typically speaking. 

In fact, Swiggy set up 96 dark stores in Q3, which is almost the same as the number it added in January 2025. And across February and March, we can expect another 200 dark stores from Instamart to meet its target of 1,000 stores by March 2025. 

“It was a pure capex expenditure for them in the last quarter. These dark stores will start bearing results in the next 2-3 quarters,” Sameer Sharma, cofounder of uEngage, said, adding that Instamart continues to be razor focused in the categories it operates, unlike Blinkit which has more risk appetite. 

A recent Citi brokerage note elaborated — while all the three players are pursuing higher SKU count (>20K SKUs), this will reduce cart abandonments and help share gain in household grocery basket share. 

Besides increasing SKUs, Instamart is also trying to retain customers, but this is taking a toll on its unit economics.

Why Contribution Margin Went For A Toss

When Swiggy went public late last year, the focus was completely on profitability. But after the IPO, the company has loosened its hold on the contribution margin in quick commerce. 

While it achieved positive unit economics in the food delivery business, the quick commerce growth is heavily reliant on discounting. A recent example of Swiggy offering ‘Free Cash’ for Instamart orders is a clear indicator of this dependency. Some users were given Free Cash worth INR 5 Lakh to be used on a single order, which later turned out to be a bug in Swiggy’s system. 

This error, nevertheless, highlights that taking users away from Blinkit and Zepto has not come cheap for Swiggy.

Explaining this, Sharma added, “ Typically, the cost of six cans of an aerated drink on Blinkit will be the same as eight cans on Instamart, so Swiggy Instamart is essentially paying for two cans through discounts from its own pocket.” 

This will increase the gross order value (GOV) and the average order value (AOV), but not the take-rate for Swiggy. In Q3 FY25, Instamart saw 13% QoQ increase in GOV to INR 3,907 Cr, while its average order value (AOV) grew by 7% QoQ to INR 534 Cr.

Besides discounts, another impact on Instamart’s contribution margin comes from the delivery costs. Though the company is widening its dark store networks which will ensure quicker delivery, this will definitely increase its manpower costs. “Competition is high, and Instamart not only has to retain customers but also their delivery partners by giving them incentives, or else they will jump ship,” Meena added. 

What Lies Ahead For Swiggy Instamart?

As per industry experts, Instamart needs to work on improving customer stickiness. A majority of smartphone users in metros and Tier-I cities will have all three major quick commerce apps –   Instamart, Blinkit and Zepto. 

The app they use for ordering largely depends on categories, assortment of products and pricing. The delivery time is no longer a moat for any one player since nearly all have figured out how to make deliveries in the fastest possible time. 

As per Datum’s Meena, Instamart has failed in capturing the “mind-share” of metro users, and suffers from poorer brand recall for quick commerce.

Citi’s research note commending Swiggy finally launching standalone application for quick commerce said, “…We believe QC as a standalone offering should help it (Swiggy) attract a wider audience (beyond food delivery’s audience) more easily (as demonstrated by Zomato) and could over the medium term, enable both services to aid cross promotions at scale.”

With the recent development, it seems Swiggy has identified the issue and as a result has carved out a standalone Instamart’s app. Not only this, Swiggy has also launched a separate application, Snacc, to compete in the quick food delivery space.

But Instamart cannot stop worrying about the growing competition. Players such as Amazon, Flipkart, PhonePe and BigBasket are also expanding in the quick commerce space and are likely to scale up rapidly to compete with existing players. 

In this context, Swiggy’s investments in Instamart need to deliver returns faster than Blinkit’s investments last year because the competition is heating up, and Swiggy Instamart does not have the luxury — which it perhaps did 12-15 months ago — of taking it slow and steady

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Edited By Nikhil Subramaniam