The fast-paced business sector is buzzing as consumers increasingly seek instant gratification, making it a rapidly expanding market with a vast potential audience. For entities like Zepto, Swiggy Instamart and Blinkit, their gross order value growth is expected to continue at more than 50% in the short to medium term, according to a report by Elara Securities (India) dated 7 March.
No surprise then that e-commerce companies are vying for a piece of the pie, with reports indicating that Flipkart is also targeting this sector.
Meanwhile, Zepto’s recent membership program, the Zepto Pass, which offers free delivery and big discounts, has gained impressive traction. Zepto claims that subscribers increased their monthly spending on the program by more than 30% during the pilot phase, indicating the growing appeal of the market.
As such, Zomato Ltd, which operates in the fast-paced business market through Blinkit, foresees future growth driven by this segment.
But competition is intensifying, and the road ahead for Blinkit may not be so smooth, although its strong market presence and healthy balance sheet may help it stand out against peers. For perspective, 90% of Blinkit’s gross order value comes from its top eight cities, which shows a high level of adoption. Furthermore, at the end of the December quarter (Q3), Zomato’s consolidated business had a closing cash balance of approx ₹12,000 crores.
According to JM Financial Institutional Securities, Blinkit held a 45% share of the fast commerce market in Q3, followed by Swiggy’s Instamart with 27%, Zepto with 21%, and Bigbasket-owned BB Now with 7%.
True, Blinkit has losses at the moment, but it is moving towards profitability. In the three months to December, Blinkit posted an adjusted Ebitda (earnings before interest, tax, depreciation and amortization) loss of ₹89 crores, compared to a loss of ₹125 crore in Q2. Adjusted Ebitda is Ebitda adjusted for equity payment costs and lease payments.
Investors, however, should be cautious. Flipkart’s entry could intensify competition, potentially leading to increased discounts and delaying Blinkit’s path to profitability. “E-commerce companies have primarily been market models, while fast-paced business is inventory driven, which can also require a lot of time, effort and investments to scale up,” said Karan Taurani, analyst at Elara Securities (India). Thus, investors will closely track Flipkart’s execution strategy in the fast-paced business segment.
Moreover, unlike Blinkit and Instamart, Flipkart is said to be planning to partner with entrepreneurs and sings for delivery instead of operating dark stores—warehouses dedicated exclusively to fulfilling online orders.
“Historically, it has been seen that e-commerce companies that do not control their inventory have not succeeded because the user experience has been compromised. Complete dependence on third parties raises reliability concerns,” said Nikhil Choudhary, assistant vice president – equity research, Nuvama Institutional Equities. Additionally, changing from a minimum one-day delivery model to a 15-minute delivery model is difficult because it requires. a different technology and supply chain approach, added Choudhary.
Zomato’s investors are nervous. Shares of the company have been under pressure this week, down 7% through Wednesday, but bounced back on Thursday, up 3%. In any case, investors are sitting on handsome gains. A strong earnings delivery in the past few quarters has meant that Zomato’s stock is up 200% in the last year. To a good extent, the stock’s trajectory now depends on Blinkit becoming profitable.
(tagsTo Translate)quick business sector