Quick commerce applications encourage consumers to place larger orders
Quick commerce platforms like Swiggy Instamart, Zepto, Reliance Retail-backed Dunzo, and Zomato’s Blinkit are pushing for larger order sizes from customers, offering incentives and discounts on for orders above Rs 1,000 as they look to cut their cash burn.
Instamart and Zepto have been trying to nudge users to increase their order size by offering incentives for orders above Rs 1,000. Meanwhile, Dunzo has been incentivising customers to opt for a 60-minute delivery so it can club multiple orders and reduce burn, as ET reported previously. Blinkit and BigBasket’s BB Now are the other players in the so-called ultra-fast grocery delivery space.
The push for higher order value from Swiggy and Zepto comes when funding is hard to come by for high cash-burn sectors like quick commerce. Increasing the cart size is one way for quick commerce companies to achieve better unit economics as bigger order sizes would bring the cost of servicing each order down.
The average order value for Swiggy Instamart is around Rs 400, according to people aware of the matter, while BigBasket’s is around Rs 460, according to the firm.
According to a report published by brokerage firm Bernstein in February, quick commerce companies in India have an average order value of $6, which is roughly Rs 490. This is about half of traditional e-grocers in India, but the order frequency is much higher.
To double down on increasing the order size, food and grocery delivery company Swiggy is planning to introduce three-wheelers to deliver larger orders to customers, a person aware of the matter said. The firm is also sending larger delivery bags to dark stores.
“A lot of customers are transferring their monthly baskets to Instamart due to the selection as well as the pricing it offers. To cater to these needs, we are adding to our capabilities in the backend,” the company said in an emailed response to ET.
“The focus is to keep increasing the average order value,” Swiggy said. “It is because as consumer cohorts mature, average order value grows.”
Zepto did not respond to ET’s queries.
BigBasket, which is a late entrant to the quick commerce segment, is expanding the coverage of its quick delivery service BB Now. According to the company, BB Now already services about 80% of BigBasket users and will have full coverage in the top 10 cities besides expanding partly in tier 2 cities before the end of February.
ET reported on December 8 that the SoftBank-backed food delivery company is laying off around 250 employees this month with further layoffs planned next year. The company has been moving some people out of its Instamart business to other verticals in an effort to reduce burn in its quick commerce business, sources briefed on the matter said.
“If earlier 10 product managers were working on a problem, that number has been reduced to around 5,” said a source. “The company is planning to make do with limited resources for Instamart.”
Swiggy denied it was restructuring Instamart.
Quick commerce platforms like Instamart and others are also increasingly looking at expanding the range of products beyond groceries.
Earlier, most platforms carried about 3,000-4,000 items for quick delivery but that is being increased now. Categories like beauty and pharmaceuticals are among the ones that Swiggy is looking at for Instamart, the source quoted above said. It has already started offering products in categories like pharmaceuticals, baby care, beauty and stationary in select markets.
“As for the categories, we’re always looking for newer use cases and whitespace in the selection we can bring to users. Gifting, stationery, pet and baby care are some of the areas where we will continue to grow our selection,” Swiggy said.
Experts point out that these are all attempts to make most of existing users as acquiring new customers is even more expensive in a tough funding environment.
“Growing the market is not just about new users but also increasing the use cases for existing users,” Swiggy said in a statement.
Dutch-listed consumer internet investment firm Prosus, which is the largest investor in Swiggy, said in a recent filing that its share of Swiggy’s trading loss increased to $105 million from $34 million driven by investments to increase growth in both the core food delivery business and in Instamart. This would translate to a burn of over $300 million for the six months ended September 2022 or about over $50 million per month.
Swiggy is also making changes to its loyalty programme Swiggy One, increasing the minimum order size for free delivery from Rs 99 to a higher amount, the source quoted above said. Swiggy did not respond to a specific query. The minimum order value for free delivery was Rs 101 in Chennai as of Monday.
Blinkit recorded a gross merchandise value (GMV) of $270 million from January to July 2022, according to a research note published by investment banking firm Jefferies on November 24. Jefferies said Swiggy’s losses during the January-June period were “much higher at over $315 million”, compared to approximately $50 million in losses for Zomato on a standalone basis, and nearly $170 million, inclusive of losses at Blinkit.
