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.
Missed last few stories?
Good analysis.
And it’s right development, we don’t need 10mins grocery top ups
Unfresh stocks , increased lethargy on individuals part to sit on couch and do everything by twiddling of thumbs and no faith in white labelled stocks (due to any kind of adulteration possible) best is this model is laid to rest !