Why will 10 min grocery delivery die? 🥺
Growth at all costs is dead - 10 min grocery delivery apps.
Welcome to the 127th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
Prediction for 2023 → Zepto, Swiggy will shut 10 min grocery delivery.
The business model is breaking & here’s why ⬇️
Quick context 🗓
Swiggy Instamart has ~ 8 months of runaway left & Zepto might want to show path to profitability very soon considering the macro fundraise scenario.
Why do I think instant delivery is shutting down? 👇🏻
1/ Growth at all costs is dead 🏴☠️
Try raising a growth / mature stage VC round in this category. Every dollar raised is asking for operational profitability or atleast path to it. You can no more throw user growth numbers on a G-sheet and raise money. Operational revenue + margins are a thing.
2/ Instant grocery margins are non-existent ♟
I wrote a larger piece on this in April 2022 (I will link it in the comments). But, larger context being razor thin margins (7% to 12% of order value) in grocery & cost to service (₹40 - ₹60) making it a loss making affair. Which (40 low average order value items is high. Which brings us to the next problem.
3/ The average order isn’t increasing 📉
Order size solves for margins per order and that hasn’t happened as claimed. Now, you know why still a very large part of BigBasket’s business isn’t BB-Daily. It’s all about basket size. Top up grocery can never compete with monthly grocery orders.
4/ Whitelabling grocery products has low adoption 💔
The margins can only improve if Swiggy Instamart, Zepto launches their own “Atta, Sugar, Wheat, Rice” & reach a substantial percent of order share. This could have given the extra bump in margins.
5/ Cost of delivery partner supply 📈
Increased fuel prices and inflation has driven hourly earnings to increase which is understandable. But the margin per order hasn’t → putting pressure on the business model.
So, what's next for quick grocery delivery apps? 🎯
Short answer : Stop the loss, build real Dhanda.
You will see few things happen 🍯
1. Instant grocery will carry a surge fee.
2. Milk run model (one pickup, multiple deliveries).
3. Discounts for higher average order value.
4. Whitelabeled product experiments on app homepage.
But, sensible business models will scale ✨
You might see resurgence of BigBasket OG model of milk-run and ordering monthly supplies scaling. Plus, BigBasket vending machines in bigger societies will scale (it’s profitable - but interestingly, it’s not grocery).
That's all for now ✨
I write daily frameworks about revenue based growth for internet companies. Over 59,000 growth leaders & founders from top marketplace, SaaS, fintech, edtech, health-tech companies around the world follow my weekly newsletter. If I have added value to your thought process, please share this newsletter - I will be grateful.
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