How will Zomato benefit from Blinkit’s grocery delivery business?

“Experimenting a lot and keeping that works”, is the current guiding motto of Zomato after announcing the acquisition of BlinkIt for $569 million in an all-stock deal. The transaction is expected to be closed in August 2022.

In a blogpost, Deepinder Goyal (Founder and CEO of Zomato), said that quick commerce had been their priority since the last year, and the delivery business is synergistic with Zomato’s food delivery which is going to be a win in the long term.

Zomato plans to keep BlinkIt separate and Albinder Dhindsa (CEO, BlinkIt) will continue to lead the business. This arises as to the belief that ‘super brands’ would work better than ‘super apps’ in India.

Zomato is all about ‘food’ in customers’ minds and BlinkIt is associated with groceries and supplies. In the long-term, both businesses will benefit from each other’s large customer base and visibility.

BlinkIt: An Overview

• BlinkIt is an on-demand quick-commerce marketplace that delivers groceries and other goods within <15 minutes.
• BlinkIt (formerly Grofers) was founded in 2013 and became a rival to BigBasket regarding next-day delivery.
• It became a unicorn in August 2021.
• It pivoted to quick commerce from next-day delivery and rebranded into BlinkIt to match its mission to deliver in the blink of an eye.
• Despite being a loss-making company, Zomato has decided to acquire BlinkIt for $569 mn to achieve synergy as BlinkIt has shown tremendous growth after pivoting.

Zomato + BlinkIt: Drive to Success in Quick-Commerce

The acquisition of BlinkIt is one of the latest investments made by Zomato, earlier investments include acquiring UberEats India, backing Shiprocket, MagicPin, CureFit, etc. The acquisition is a relief to BlinkIt as it was at a loss earlier and laid off several employees, delayed payments, and shut down a few dark stores.

With brands adopting 10-minute delivery, the quick commerce marketplace has become hypercompetitive and Zomato plans to compete with Swiggy Instamart, BigBasket, Dunzo, etc. after acquiring the grocery business BlinkIt.

Zomato’s CEO mentions that the q-commerce segment is a natural extension to their food delivery as both of them are hyperlocal models, and just like food delivery, BlinkIt also caters to quick delivery to customers. Zomato is aiming to drive high customer engagement and increase the customer wallet share spent through quick commerce.

How acquiring BlinkIt’s Grocery Delivery Business is going to be profitable for Zomato?

• Delivery Fleet Utilization:

Expansion in the addressable market and the profit pool is going to make Zomato’s business defensible. Also, food delivery at peak times and grocery delivery at non-peak times will help Zomato to reduce delivery costs and utilize the delivery fleet.

• Customer Metrics and Spontaneous Purchases:

In May 2022, the monthly order frequency on BlinkIt was about 3.5 times, which is higher than Zomato’s food delivery. The customer metrics clearly indicate that people tend to shop spontaneously and prefer delivery in <15 minutes. In that way, quick commerce is going to expand the addressable market for Zomato.

• Speed and Team:

Rather than building organically, Zomato chose to do it inorganically by acquiring BlinkIt for two key reasons: Speed and team.

It would have cost Zomato insignificant time and money to build in-house. BlinkIt’s capability set such as integrated tech platform, optimized dark store network, business scale, and notable third-party relationships made Zomato buy than build. Also without weakening the quality of Zomato’s existing team focused on the food delivery business, BlinkIt’s team will provide the bandwidth and extensive experience to execute effectively in quick commerce.

• Success factors:

BlinkIt’s large network of dark stores, its relationship with sellers and brands, and optimized tech stack would add up to Zomato’s extensive hyperlocal network and wide customer base resulting in a successful quick-commerce foray.

As Deepinder Goyal states, “…hyperlocal delivery alone can not drive success in quick commerce.” That is where BlinkIt happens to be with its deep understanding of supply chains.

• BlinkIt’s Numbers:

BlinkIt’s gross-order value (GOV) rose by 36% in May 2022 after pivoting to quick-commerce in January 2022, and it has grown since then. The revenue grew by 162% as per data by Zomato. These numbers are indicating towards a profitable merger and Zomato is confident enough that the profitable journey will be accelerating.

Quick commerce is estimated to grow to $5 billion by 2025 and is becoming one of the major e-commerce models to exist in India, and traditional brick-and-mortar stores are being replaced with online stores. This is in the favor of Zomato’s foray into quick commerce and there’s no doubt that a delivery business like BlinkIt would scale extensively.