By purchasing Blinkit, Zomato has joined the frantic race for online success. In an effort to grow its primary business of meal delivery, it does this in an effort to catch up with Swiggy and a number of other younger firms in the quick-commerce sector.
Following the announcement of its $569 million all-stock deal, Zomato's current mission statement appears to be "experimenting a lot and keeping what works."
Zomato's founder and CEO, Deepinder Goyal, made the claim in the announcement that speedy transactions had been a focus since the previous year and that the delivery industry is completely synergistic with Zomato's food delivery, which bodes well for both companies in the long run.
Albinder Dhindsa, the CEO of BlinkIt, will continue to run the company, but it will remain distinct. This results from the reasoning that "super brands" as opposed to "super apps" typically perform better in India.
Customers connect Zomato with "food," whereas BlinkIt stands for "groceries and supplies." Both will gain from one other's visibility and clientele in the future for growth and profitability.
Describe BlinkIt.
an on-demand marketplace for rapid commerce that guarantees delivery of food and household goods in 15 minutes.
It was established in 2013 as Grofers and swiftly developed into a competitor of BigBasket for next-day delivery.
It switched from speedy commerce to next-day delivery and changed its name to BlinkIt. Delivering goods "in the blink of an eye" is its stated goal.
In August 2021, they became unicorns. Even though it is currently a losing business, Blinkit has grown quickly since its flip.
Zomato and BlinkIt are attempting to succeed in fast-commerce.
Zomato has made a number of investments over the past few years; some of the earlier ones included MagicPin, UberEats India, Shiprocket, Curefit, etc. The acquisition is a huge relief for Blinkit, which had been operating at a loss, terminating numerous employees, delaying payments, and closing several of its dark businesses.
The quick-commerce industry has recently become more competitive. The promise of "10-minute delivery," which is available 24 hours a day, seems to have resonated with customers. Competition will always arise as demand rises, and in this fiercely competitive market, there are now a large number of firms vying for market share. Popular names include Swiggy, Instamart, and Dunzo.
Zomato thinks the combination would create the synergies needed to increase share of wallet and boost customer engagement because the quick-commerce sector is a logical extension of their meal delivery business and both of them use a hyperlocal business model.
How will Zomato gain from buying BlinkIt?
1) Asset (delivery fleet) utilization: Purchasing a grocery delivery company should expand Zomato's scope of operations, giving it access to a wider selection of products (offerings) and use cases that span a bigger portion of a 24-hour period. While grocery delivery has its own peak and off-peak hours, food delivery peaks around meals, on weekends, etc. Profitability increases as a result, as does asset (fleet) utilisation, which boosts the cost-benefit analysis.
2) Convenience of "15-minute delivery": In May 2022, Blinkit monthly order frequency was 3.5 times greater than Zomato's food deliveries.
Customers are more motivated to make impulsive purchases thanks to the convenience of "15-minute delivery," according to consumer data. Therefore, the integration of Blinkit's quick-commerce should result in a substantial extension of Zomato's addressable market.
3. Build vs. Buy: Blinkit has created crucial infrastructures like a reliable technology platform, solid partnerships with outside parties, a complex dark-storage network, and a company that has attained respectable scale.
Now, Zomato would have to spend a significant amount of time, money, and energy creating something akin to Blinkit. As a result, they decided against building and instead took the well-worn path of purchasing. The two main factors that would have driven Zomato to do this seem to be team and speed.
Furthermore, the acquisition of Blinkit adds a staff that is already operational and has the necessary experience, rather than adding to the burden on resources that would have been needed to handle the grocery delivery business.
4) Synergistic: According to Zomato's executive team, hyperlocal delivery alone cannot guarantee quick-commerce success. Blinkit would complement Zomato's enormous hyperlocal delivery network with its in-depth knowledge of supply-chain networks, sizable customer base, intricate dark-store network, connections with vendors and sellers, and robust tech stack.
5) Ad Money: According to Zomato, Blinkit has a higher potential for generating ad revenue than it does, which is a crucial source of income for businesses like this.
Although the consumer categories of the two companies overlap significantly, statistics and market insights suggest that older user groups who have not yet used Zomato's food delivery service are already utilising Blinkit.
Additionally, Zomato contends that quick-commerce generates more advertising money than food delivery since consumer brands and packaged goods spend far more on digital media than restaurants and cloud kitchens do.
6) BlinkIt's Statistics: In January 2022, Blinkit switched to quick-commerce. Its GOV (gross order value) increased by 35% by May 2022. Zomato's data indicates that Blinkit's revenue increased by more than 160%. These figures have led Zomato to conclude that the merger is likely to succeed.
Success factors for quick commerce: who possesses what
Blinkit:
Strong tech stack: Blinkit, as was already noted, has a strong tech stack that controls all aspects of last mile operations.
Blinkit's intricate network of storage facilities and dark stores (approximately 3,000 sq. ft each)
Strong partnerships between sellers and third parties in Blinkit's sourcing
Zomato:
Low CAC: Zomato has a sizable client base of over 16 million monthly active users.
Delivery to the last mile: Zomato has 316,000 delivery partners who work together to create a vast network in more than 1,000 cities and municipalities.
Repeat Purchases: Both platforms' users have shown a positive habit of making repeated purchases. Additionally, integrated membership programmer greatly support this.
As can be seen, fast commerce is expanding quickly in India. Many conventional retailers using the brick-and-mortar business model are embracing e-commerce and using cutting-edge digital tools, platforms, and systems like last mile delivery software. At this point, Zomato's foray into fast commerce appears sensible.
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