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Moving away from pureplay food aggregation, Swiggy is betting on quick e-commerce segment and pick-up services, as diversification to bring “unparallel convenience” to its users.
Currently, contributing around 25 per cent of the total revenue, the company said diversification into adjacencies will be around 50 per cent of the revenue in the next three to four years.
At a recent investor call hosted by ICICI Securities, Swiggy CFO Rahul Bothra said that Swiggy, in the near term, will be focusing to establishing market leadership in top metros, eventually targeting the next 500 towns as key growth drivers for the long term.
Diversification endeavours
“Company’s commentary hints at significant progress on its diversification endeavours. Use cases, outside the food delivery, are currently contributing to approximately 25 per cent of revenues. Swiggy expects this share to inch up to 50 per cent in 3-4 years. Outside the food delivery, the company called out strong traction – in Super daily, Instamart and Genie , ” the ICICI Securities report quoted.
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As the pandemic hit hard, Swiggy, like its rival Zomato, experimented with several other businesses utlising its existing delivery fleet. One of the successful pilots of the lot was Swiggy’s Instamart launched last year – a grocery buying and delivery service offering doorstep deliveries within 30-45 minutes.
Instamart’s success
Swiggy declined to comment on our emailed queries. However, a source close to the company told BusinessLine, “Instamart has been a success, we are already present in all metros. They have even managed to reduce delivery timing in some places like Bangalore to just 15-20 minutes. This is quick commerce and very different from Dunzo and BigBasket’s model.”
“Unlike BigBasket, which is into online retailing of groceries, Swiggy is partnering with dark stores owned by third party sellers. Even in comparison to Dunzo, which is operating in eight to 10 cities, Swiggy has been faster in expanding Instamart,” the source added.
Swiggy had earlier tried retailing model too for groceries through Swiggy Stores, which was shut down earlier this year. Meanwhile, Swiggy renamed Swiggy Go – its pick and drop service to Genie. Genie is present across 65 cities. Bothra indicated during the call that Instamart is witnessing strong traction with better access to customer base than even food delivery. Swiggy currently sees very low e-commerce penetration in the grocery segment.
Also read: Swiggy ties up with Hero Lectro WINN, to pilot cargo e-bikes for food delivery in Hyderabad
“Unlike BigBasket or Grofers, which focus on driving monthly purchase behaviour, Swiggy intends to replicate the ‘mom and pop’ purchase behaviour involving regular top-up purchases. Over time, the company expects to have a low average order value AOV ( approxmiately $7-9), but high frequency of purchases (4-5 times per month),” the report noted.
“The company already has its existing fleet of delivery executives. Getting into adjacencies in only optimising the use of those resources. I don’t think we should compare companies like BigBasket and Grofers with Swiggy Instamart’s model because unlike them Swiggy is not retailing online. Instead, Swiggy is only delivering it at your doorstep so that you don’t have to out and buy. The ticket sizes and value propositions are different,” Sudheer Guntupalli, Analyst, ICICI Securities told BusinessLine.
Trial and error
The source said, “The diversification is very much in line with the company’s mission to offer unparalleled convenience to its users. Swiggy will keep trying newer businesses and see what works.”
Guntupalli added, “We liked Swiggy’s diversification strategy. For internet businesses, prodding adjacent optionality, experimenting proactively is very important. If something works out, then you can grow that fast. Between Swiggy and Zomato, the former has been more proactive with testing out other segments. Not all of them are successful, but that’s fine for a company at this stage of evolution.”
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