Sriharsha Majety, co-founder and CEO of Swiggy, said that while speed is important, having the right product and SKU assortment will be a key differentiator in fast commerce

Swiggy is in the process of launching mega dark stores for Instamart, which will support the push for a wider product range and higher SKU count

Mega dark stores will also support staggered deliveries, with groceries delivered in 10 minutes and larger items in 20 minutes.

All eyes are naturally on you Fast Considering the massive IPO, another mega plan is afoot in Bengaluru, keeping Swiggy Instamart in mind.

Consumer services giant is looking for fast trading catch up with competitors By expanding the size of Instamart dark stores to offer a wider range of products in 10 to 20 minutes.

Finance chief Rahul Bothra told Inc42 that Swiggy is in the process of launching ‘mega dark stores’ with an area of ​​8,000-10,000 sq ft in various places in Bengaluru. He added that flash trading currently contributes 40% to Swiggy’s consolidated revenue and the focus is on increasing this share in the near term.

“The dark stores we are currently opening will ideally have a space equivalent to 2-3 of our existing dark stores. This will not only increase our SKU coverage, but also support a variety of deliveries; so we can deliver some products in 10 minutes and some in 20 minutes,” added Swiggy CFO.

Swiggy co-founder CEO Sriharsha Majety added that while speed is important, having the right assortment of products and SKUs will be a key differentiator in the express commerce space.

The CEO believes that the gig commerce industry is going through a hyper-growth cycle where the assortment factor will trump delivery speed.

While increasing delivery may seem contrary to the express commerce model, Bothra said that according to Swiggy’s consumer behavior research, the need for 10-minute delivery is specific to groceries and essentials only, while consumers have adapted to waiting for delivery of non-grocery items. .

More and more flash trading platforms are looking for ways to extend delivery times for certain categories and bulk orders. Bothra added that Amazon offers staggered delivery times, for example, for a large order or when combining products from multiple categories.

“For example, consumers today can get plain white sheets delivered within 10 minutes, but when Swiggy Instamart offers a sheet catalog in 15 colours, consumers see no problem waiting for 20 minutes,” Bothra added.

Swiggy Instamart 2.0 and Mega Dark Stores

Swiggy’s ‘mega dark stores’ for Instamart will cover a radius of 2 Km and these stores will increase SKU selection without compromising on flash commerce customer experience. The idea is to address the flash commerce 2.0 moment where consumers aren’t just ordering groceries and essentials.

While setting up mega dark stores is indeed a capital-intensive and asset-intensive move, it is a necessary step for flash commerce platforms looking to increase average order value and offset delivery costs as well as technology and infrastructure costs.

Swiggy’s major rivals Blinkit and Zepto are already pumping millions of dollars into setting up larger dark stores and increasing the number of SKUs and product assortment.

CFO Bothra predicts a 70:30 revenue split between grocery and non-grocery categories in the near future.

According to Swiggy’s pre-IPO filings and investor presentation seen by Inc42, the company aims to expand its dark store network in existing and new cities and also onboard more brands to offer a wider selection of products. Another big focus area is improving fulfillment efficiency, where mega dark stores will play a big role.

“The share of non-grocery products on Instamart increased from 18.20% in FY22 to 25.28% as on June 30, 2024, indicating growing consumer preference for online purchases in this segment,” Swiggy said in its investor presentation .

Increasing the number of SKUs is critical for most scaled flash commerce platforms, especially given that Flipkart, Tata-owned BigBasket, Amazon, JioMart and others are planning to enter the space with a full range of products.

Speaking about the competition, Bothra said the flash trading sector looks ripe for at least 5-6 players. He also believes that customer acquisition in express commerce will depend on convenience, product variety and customer experience. And he believes this will be Swiggy’s advantage.

“We don’t think there will be a dual situation like food distribution. But we were able to quickly scale our express commerce from 30-minute to 10-minute delivery within a year, and the entry of e-commerce giants did not deter us. These players operated in different market conditions and will first need to establish dense networks of fulfillment stores. Some tried to deliver in 30 minutes but failed,” the CFO added.

Swiggy’s B2B Game

Swiggy plans to support revenue growth on the consumer front with a B2B distribution and supply chain platform for FMCG retailers and wholesalers.

“We are growing equitably in the B2B business, where we help retailers and wholesalers strengthen their supply chains, providing them with technology skills, infrastructure and access to brands,” added Swiggy CFO Bothra.

Especially in July 2023, the company LYNK logistics was acquired To enter the food and grocery retail supply business.

LYNK leverages a proprietary, integrated technology platform to power the retail distribution value chain in warehousing, inventory management and logistics operations. Its client portfolio includes Hindustan Unilever, ITC, Tata, Lakme, PepsiCo, Britannia, among others.

Swiggy management said that the company acts as a technology provider for small and medium retailers and also helps improve supply chain efficiency between FMCG brands and retailers.

Swiggy Walled Garden

Instamart is a big focus area for CEO Majety, but it’s just one of many verticals for the consumer services giant. Swiggy is a super app in some ways and Majety targets 110 Million active users who transact at least 15 times a month across food delivery, express commerce and other sectors.

Swiggy’s investor pitch requests order frequency has increased by 70% in the last 6 years, while average expenses have almost tripled in the same period.

More than 27% of Swiggy’s user base uses more than one of its services and places an average of three orders per month.

In terms of average order value, Swiggy Instamart has recorded significant growth from INR 398 Cr in FY23 to INR 460 Cr in FY24. On the other hand, in the food delivery vertical, AOV saw only a modest increase from INR 416 Cr in FY23 to INR 428 Cr in FY24.

Asset management and investment consultancy Deven Choksey believes that Swiggy’s growing engagement can be attributed to the company’s unified app, expanding service offerings and a strong partner network.

But since this is where the frequency of use will be highest, there is no doubt that flash commerce and Instamart’s super app service are the cornerstone.

This means the biggest challenge for CEO Majety & Co will be to tap into the rapid commerce funnel and bring more consumers into Swiggy’s walled garden. .

(Edited by Nikhil Subramaniam)