Blinkit’s explosive growth: How Zomato is Redefining Quick Commerce in India

Welcome to 'Passive Wealth' your go-to newsletter for deep dives into the most dynamic companies and industries shaping the future. In today’s deep dive, we’ll explore a story of explosive growth, aggressive expansion, and strategic execution of Zomato’s quick-commerce arm, Blinkit.

With its fast-paced expansion and unique business strategies, Blinkit has emerged as a formidable player in the quick-commerce (q-commerce) market. From a smaller presence, Blinkit has rapidly scaled up to become a strong competitor in the Indian q-commerce landscape. Today, we’ll dissect their journey, its competitors, and the larger e-commerce industry.

The Explosive Growth Story

Let’s start with the growth story. Blinkit has expanded from being present in 26 cities in March 2024 to over 44 cities by September 2024. This aggressive geographic expansion has helped them cement their position in key regions such as Delhi-NCR, Punjab, and Rajasthan.

They’ve strategically added Tier-2 cities like Haridwar, Jodhpur, Mohali, and Rohtak, growing rapidly beyond the core hubs. Compared to its competitors, Blinkit’s footprint is far ahead of Zepto, which is present in just 13 cities, and BBNow, which operates in 23 cities.

Why does this matter? Well, Blinkit’s strategy is to dominate markets by capturing first-time users and gaining operational efficiency through better use of their large ‘mother warehouses.’

With 639 stores as of June 2024, Blinkit is targeting 1,000 stores by March 2025 and a whopping 2,000 stores by December 2026. Clearly, Blinkit is on a mission to capture the lion’s share of India’s rapidly growing q-commerce market.

Innovations in Dark Stores and Split Shipments

Let’s talk about operations. Blinkit isn’t just expanding its geographical footprint but also innovating how they operate. Their larger dark stores allow for a broader assortment of products, enabling them to offer more categories beyond essentials.

We’ve seen Blinkit pilot the return of products, particularly in categories like apparel — think t-shirts, sarees, and kurtas. This return pilot is currently running in Gurgaon and could revolutionize how q-commerce handles non-perishable goods.

Moreover, Blinkit has adopted split shipments for specific orders. This means that when a product is out of stock in one location, it’s shipped from another nearby dark store.

While this adds operational complexity, it gives customers more variety and ensures faster deliveries. These innovations have made Blinkit’s operations more sophisticated and positioned them for a larger share of consumer wallets.

Competitive Landscape and Challenges

Now, no story of growth is complete without competition. The quick-commerce market is heating up, and Blinkit faces aggressive pricing challenges, particularly from Zepto.

In Bengaluru, Zepto has introduced a special ‘SuperSaver’ scheme, offering products at a cheaper price point. Blinkit, on the other hand, maintains a more balanced pricing approach, offering slightly fewer discounts than its competitors.

As more challengers enter the market, discounting and price wars could escalate. Blinkit may be forced to match these aggressive tactics to maintain its market share, which could impact their take rates and margins in the near term."

Growth Outlook and Financial Performance

Despite the competitive environment, Blinkit’s growth story is far from over. The street has forecasted a GMV (Gross Merchandise Value) CAGR of 81% for Blinkit between FY24-27. Blinkit’s GMV is expected to reach a staggering ₹741 billion, putting them in direct competition with retail giants like D-Mart, which is forecasted to hit ₹873 billion in the same period.

With this projected growth, Blinkit’s (Zomato) valuation is rising. This surge reflects investors' growing confidence in Blinkit’s ability to sustain its rapid expansion and eventually achieve profitability, despite the challenges posed by intense competition and regulatory risks."

The Road Ahead – Opportunities and Risks

Looking ahead, Blinkit’s journey is an exciting one. The company is exploring new categories, including electronics and even apparel, which could significantly boost average order value.

However, it’s important to note the potential risks. As Blinkit adds more product categories and expands into new cities, operational complexities will increase. Managing this growth while maintaining profitability will be a key challenge.

Moreover, the regulatory environment could become a major hurdle, especially with discussions around delivery rider payment regulations. But with Zomato having a significant domestic shareholding of 45%, they may be better positioned to handle potential government scrutiny compared to foreign-owned competitors."

Closing thoughts:

In conclusion, Blinkit’s explosive growth is reshaping the quick-commerce landscape in India. Their rapid expansion, operational innovations, and strategic moves are setting the stage for them to become a dominant player.

However, the road to sustained profitability will be riddled with competitive pressures and operational challenges. It will be fascinating to watch how Blinkit navigates this growth trajectory over the next few years."

That’s all for today’s newsletter. If you enjoyed this deep dive, don’t forget to subscribe to Passive Wealth for more analysis on the most dynamic companies in the market. Thanks for reading, and we’ll see you in another interesting deep-dive research!