India’s Swiggy, the SoftBank-backed food delivery group, will look to gain an edge over listed rival Zomato by shifting most of its business to delivering groceries and other merchandise.
Sriharsha Majety, co-founder and managing director of Swiggy, told the Financial Times that non-restaurant food deliveries made up about a quarter of the company’s revenue, but that she wanted to increase that figure to over 50% in the years to come. to come.
Swiggy has launched several alternative services, including grocery delivery and Genie courier, and completed a $ 1.25 billion fundraiser last month involving SoftBank, Prosus and others designed to propel growth. in these areas.
âSome companies are in a really exciting place where they can take it to the next level from here. Some of them will be larger than the [restaurant] food delivery business over the next four or five years, âMajety said. “I want to come back in a few years and talk about the story of a company bigger than food.”
Swiggy’s plans come as Zomato finalized its $ 1.25 billion listing last month. The IPO of Zomato, the first of a large Indian tech company, was welcomed by investors eager to participate in a record-breaking stock rally when the company never made a profit. Its shares have risen 80 percent from their issue price.
Majety said Swiggy hoped to be on the list but did not provide a timeline.
Swiggy’s diversification plans highlight the continuing struggle to build a profitable business in food delivery. Average order values ââin India of $ 5 or less, compared to over $ 30 in the United States, have prompted some analysts to question the company’s sustainability.
Online grocery deliveries represent a much bigger opportunity. Indians still rely heavily on small local stores and street vendors for their groceries, and analysts believe online sales will grow faster than other e-commerce sectors. Brokerage Motilal Oswal expects the online grocery market to grow 59% annually to reach $ 18 billion by 2024.
Satish Meena, a Delhi-based independent analyst, said Swiggy needs to expand beyond catering if it is to continue to grow. âWe have passed the period of strong growth [in food delivery]. It will take longer to add more customers and orders, âMeena said. “They have to find other ways.”
While Swiggy and Zomato have effectively ousted their old food delivery competitors, such as Uber Eats, a number of large companies are targeting the online grocery industry. This includes Mukesh Ambani’s JioMart, Tata-owned BigBasket, and Amazon.
Majety said Swiggy would benefit from its existing base of loyal, high-income customers, who were already used to ordering from restaurants on its platform.
He said they were targeting a market of “nearly 100 million” Indians, although some analysts say that in practice, the high-income urban e-commerce market is likely to be smaller in the near term.
“There are a lot of players competing,” he added. âIt’s intense. . . but for the niches we’re looking for, we feel really good.
Majety said he hoped eventually to build a platform that would provide a range of services to urban consumers. âWe are also not attached to the idea of ââdelivery. For us, the idea is to provide convenience to consumers. Delivery is one way.