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Will The 10-Minute Delivery Craze Translate Into Profitability For Startups In The Segment?

Will The 10-Minute Delivery Craze Translate Into Profitability For Startups In The Segment?

Zepto launched snack delivery in Mumbai a few days ago, becoming the latest entrant in the 10-minute delivery segment

Use of technology to predict orders, especially for food, and door-level accuracy of delivery address can help the model succeed

Intelligent order prediction mechanism will lead to less wastage and can improve margins

Food and grocery aggregators are thrilled by speed. From Blinkit to Dunzo to Zomato, many swear by the 10-minute delivery model. The latest entrant in this category is Zepto’s launch of snack delivery in Mumbai a few days ago.

Earlier, food aggregator Zomato faced backlash when it unveiled the 10-minute delivery plan – Zomato Instant. It immediately kicked up a storm. The heated debate continues even weeks after the announcement.

Netizens have cautioned against this fixation with quick delivery. Noted among them was Anand Mahindra. The Mahindra Group chairman quote-tweeted Pramesh CS, director at Tata Memorial, with a comment, “I agree.” The onco-surgeon tagging @swiggy_in and @UberEats tweeted: “I don’t care how many trolls I get with this tweet, but the 10-minute delivery for groceries is just inhuman to the delivery person. Just stop it! Customers can live with a 2- or even a 6-hour delivery time.”

The 10-minute model is born out of the necessity to innovate in the fiercely competitive tech world. Zomato founder and CEO Deepinder Goyal was spot on when he said innovating and leading from the front is the only way to survive and thrive in the tech industry.

In their bid to outdo rivals, tech startups have discovered that speed can make a difference. Goyal, admittedly a “frequent customer of Blinkit”, is not impressed with Zomato’s average 30-minute delivery as he admires the 15-20 minutes delivery by the online grocery shop, one of the early movers in quick commerce. 

Interestingly, Zomato holds over 9% stake in Blinikt, and reportedly is in talks to merge the online grocery company with itself.

Detractors of the model argue that 10 minutes is too short a time to deliver anything, given the poor road infra, bumper-to-bumper traffic and extreme climate conditions in the country. When it comes to food, the problems can multiply.

However, the strident criticism has not detracted startups from exploring this model. Y-combinator backed Zepto, for instance, launched Café format for delivery of snacks within 10 minutes. The jury, however, is still out on what format – food or snacks or grocery – will work the best in quick commerce.

But have no doubt, the delivery guys will be under severe pressure to meet the 10-minute deadline, no matter what his delivery bag contains.

Let us keep aside for a while the accusations of it being “inhuman” and “insensitive” to examine business viability and sustainability and the tech part of the 10-minute delivery model.

The whole idea is a riddle for many as it deploys complex technology. Compounding the problem, the business potential remains ambiguous.

What Role Will Technology Play?

According to Ashwanii Rawat, an expert in satellite navigation technology, particularly in the field of precision mapping and its applications, data intelligence would play a big role in making the 10-minute delivery sustainable.

He said door-level accuracy and hyperlocal spatial analysis using grids for predicting the demand for food items based on historical orders and customer persona in an area are the two factors which will help in making the model a success.

“Grids for food preferences can be created based on the demographics, along with infra details for a grid and the catchment boundary for a food outlet, to serve within less than 10-minute of drive time and ensure sustainability in the long term,” Rawat said.

Will Hyperlocal Delivery Increase Profitability?

Saying that grocery delivery is completely different from food delivery, he said that the technology for both the segments will be different, and added that food delivery will also increase the profitability of the startups.

“Data analytics for predicting orders during the time of the day and day of the week will help food outlet operators plan for their daily and hourly activities. In fact, fast deliveries will not only ensure more revenues but also improve the bottom line for the companies. Spatial technology integration in food order apps and availability of hyperlocal analysis to outlets will change the game for everyone,” Rawat said. 

Echoing Rawat’s similar sentiment, Samir Bahl, CEO of investment banking at Anand Rathi Advisors, said that unlike food, groceries come pre-packaged and don’t require any preparation time. He said the startups are banking on razor-sharp analytics to help form a pattern of food orders that will likely happen on a day, and then to prepare food in advance in anticipation of these orders in that particular pin code.

“The key variable that has to be managed here is wastage. Unlike packaged foods that have a 12-plus month shelf-life, cooked food needs to be consumed within a much smaller time frame. If gone wrong, the wastage factor by itself can pull down margins to unfeasible levels. So, it again comes down to how intelligent the order prediction mechanism is,” Bahl said, explaining the importance of technology to predict demand.

On Goyal’s recent comment that restaurants need to work on the affordability of food, Bahl said that with ordering-in becoming a common trend, more brands need to shift to the cloud kitchen model. 

“The biggest cost in any restaurant business are rentals and people (after food). Through a successful cloud kitchen model, both these variables can be minimised significantly and some of that cost-benefit can be passed on to the consumer. So, not too ambitious, but I don’t see that happening in the next 1-2 years,” he said.

Effect On Customer Acquisition 

Rawat also said that the hyperlocal focus will make customer acquisition easier as 10-minute is quicker than the time it takes to prepare the food. “An increase in demand will ensure a decrease in prices for customers. With the increasing volume of deliveries, the income of delivery partners will also go up,” he added.

Rawat said that Zomato’s model to have finishing stations that house 20-30 best-seller dishes from various restaurants based on demand predictability and hyperlocal preferences is workable as it has huge amounts of data from the past many years with location information.

“Machine learning models can be developed which can provide predictions on the day of the week and time of the day in 10 minutes of the interval with sufficient time to replenish the inventory. The customer persona mapping at high resolution will also help promote the food as per the general taste of customers in geography,” he added.

Meanwhile, Bahl said that the 10-minute delivery will be more in demand in metro cities which have the busiest road networks in the country. Therefore, he believes that the startups will fulfil the 10-minute delivery on select orders and will have a “more flexible commitment on other orders”.