Probably the peak of hyperlocal deliveries was this time last year, when Zomato announced that it was starting with ten-minute food delivery.
In April 2022, they got the service underway in Gurugram, only to reevaluate it a month later, amidst the heat wave and shortage of delivery partners.
Eventually, by January 2023, it was in the process of rebranding it (a substitute word for being shut). Forget taking the cooking dynamics for a ride, the team at Zomato was perhaps taking the profitability prospects for granted as well.
The idea of delivering food and groceries in ten minute is foolish, for the lack of a better word.
The mere workability of this marketing gimmick is based on bullying delivery partners to do the impossible, risk traffic situation on their routes, and hustle as if they are working against a ticking nuclear bomb.
Being able to deliver early is no crime, but to do it while risking the safety of the delivery partners is not worth it, and definitely not for orders as little as Rs 500. Also, luring customers into false expectations is no a great idea either.
The problems with 10-15-20 minute hyperlocal deliveries are many. One, the order size. No company can expect to turn profitable if they expect to usher 10-minute deliveries for orders as little Rs 50.
From a logistics perspective, to allocate delivery partners for such small order sizes is also against the economic interests of the company. Further, customers, at least in the Indian market and in second-tier cities, will not be keen on paying delivery fee for groceries that are only a stroll away.
Maybe this explains why Zomato announced, recently, its exit from over 220 cities, citing slowdown in demand.
Beyond the urban centres with a young working population in the services industry, hyperlocal deliveries are perceived differently in smaller town and cities.
Put simply, what works in Bengaluru doesn’t work everywhere, and perhaps this explains why Swiggy had to shut its grocery subscription service in five other cities (NCR, Mumbai, Pune, Hyderabad, and Chennai) in May 2022.
The numbers also highlight the underlying problem.
In November 2022, Zepto reported a loss of around Rs 390 crore for the first year of its operations against a total revenue of Rs 142 crore.
For Q3 of FY23, Blinkit’s losses stood at Rs 288 crore. Post acquisition by Zomato, Blinkit’s total losses were around Rs 483 crore (August-December 2022).
Against Rs 250 crore losses in Q2 FY23, Zomato’s losses surged to Rs 346 crore in the succeeding quarter (mainly due to Blinkit acquisition). Swiggy lost Rs 3,600 crore in FY22 alone.
The list doesn’t end here. Dunzo lost Rs 464 crore in FY22.
Recently, Reliance JioMart announced that they were shutting their 90-minute express delivery.
Even Big Basket, a saner player in the space when it comes to delivery promises and now acquired by Tata, reported a loss of more than Rs 800 crore in FY22.
For many, these startups are years away from maturing into profitability, and to gauge their business models or experiments through a few setbacks would be wrong. Well, they are right, but partially.
However, the problem is that most of these hyperlocal delivery experiments were not targeted towards business sustainability but marketing theatrics.
In the age of digital commerce, there is room for every company to grow, over a period of time, but the models will have to be the right balance of profitability, realistic customer expectations and experience, and decent wages for contracted employees that have room for incremental growth.
Also, the companies must not promise what they can’t supply or what is not needed.
India’s unicorn story is merely getting started, and many inevitable bumps would follow.
For now, the one silver lining is that the love-affair with 10-15-20 minute hyperlocal deliveries is coming to an end as executives turn away from eternal cash burning and focus on the fundamentals.
Only up and above from here.
Tushar is a senior-sub-editor at Swarajya. He tweets at @Tushar15_
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