10-min Delivery Wars

Remember when Domino’s 30-min pizza delivery was a game changer!

Well 30 minutes is too slow now!

10-minute delivery is the new craze!

Swiggy, BigBasket, Grofers (now Blinkit), and new entrant, Zepto all are fighting to leave a mark in this hyperlocal, hyper-fast grocery delivery market.

‍

But why the sudden rush?

10-min (or 15-min) grocery delivery is a large market and has the potential of nearly 3X of food delivery!

Food delivery is valued at ~$12 billion, I’m sure you can do the math!

‍

And why now?

It’s not new, Grofers experimented with 90-min delivery in 2016, but moved away from the model due to lack of profitability.

‍

So what has changed now?

Two major changes:

1. COVID

2. COVID (wait for it!)

‍

1. COVID: Consumer demand has skyrocketed!

I see this in our household and with friends too! The need for instant solutions/gratification has traversed from the digital world to the physical.

But convenience is just one factor (maybe the major one).

Stepping out for a quick buy requires two additional steps now:

1. Wearing a mask (for me finding it also :-P)

2. Mentally being prepared that a mask might not be enough (Omicron!)

So if I can get groceries in the same/or less time, at the same rate, at no or little delivery fees, then why not!

And this is not happening only in India, 10-min delivery startups are popping up across the globe: US, Brazil, UK, Germany, Turkey just to name a few.

‍

2. COVID: Real estate prices and driver supply

Hyperlocal delivery requires hyperlocal warehouses, i.e. warehouses with the most in-demand stock within 1-2km of the delivery area.

The operational expense of running a warehouse has gone down with commercial real estate lease rates dropping by 15-33% vs. pre-COVID.

That is a huge cost saving!

Another side-effect of COVID has been the number of Indians taking up gig-work (mostly side-gigs) as delivery partners. With increasing supply of delivery partners their cost is going down, leaving more margin for these startups.

(How Indians are earning more with side-gigs like food/grocery delivery deserves an analysis of its own)

So there you have it, the answer is COVID and COVID!

‍

Now what happens Next!?

1. Money will be bled!

The typical burn-till-you-earn playbook: Discounts, free delivery, and other freebies all will be given to acquire customers and build the habit of 10-min delivery.

Best time to be an early adopter!

*P.S: I seriously hope some players go heavy on brand-first approach, it signals a long term play.*

2. Acquisitions Galore!

With so many players in the market, consolidation is bound to happen. I believe 2 (max 3) major players will emerge with each conquering certain cities across India.

3. Self Branded Products

Once these major players are confident of their dominance, they will start increasing their margin by launching their own grocery brands (BB and Grofers already do this), or increasing/adding a delivery fee, driver tips (did you know the delivery partners don’t get 100% of the tips!)

4. Drone Delivery!

We just might see extensive use of drone delivery in this segment.
Swiggy is ahead of the rest in this aspect as it has already started trials of food delivery through drones. Dunzo is also reported to have started trials. So don't be surprised if your next midnight snack is delivered by a drone!

‍

So everyone wins?!

Any player who manages to get acquired at a premium or comes out on top will win for sure. For others funding will dry out and they will be forced to shut down.

Customers will enjoy the discounts initially, and the convenience even after the discounts go away.

Unfortunately, the delivery partners will bear the brunt of this race. As margins become thinner and major players emerge, delivery partners will have very few options left, hence their earning potential will go down with time without having acquired any major skills in the process.

Only savior can be the government, which can mandate a certain minimum earning wage for delivery partners along with healthcare benefits or mandate these startups to hire them as employees.

JOKR (operating in the US and Latin America) is one firm which has strong pro-delivery partner policies.

They don’t follow the contract/gig-worker model but in turn hire the delivery partners. This gives them health benefits, guaranteed minimum hourly wage, and PTO.

I have my doubts of any Indian firm adopting these policies on their own, but I hope I am wrong here.

Yet another exciting space to keep an eye on in the months to come!

May the fastest.. I mean, the best startup win!

‍

Current Players and their X-factor!

‍

Blinkit (Grofers):

- Strong experience of grocery delivery since 2013

- Previously tried 90-min delivery model

- Rebranding signals extreme focus on 10-min delivery model

- Backed by Zomato; access to industry best practices in food delivery

Swiggy - Instamart

- Leader in food delivery; access to industry best practices

- $700m investment in 10-min delivery model

- Existing Subscription-based grocery service (SuprDaily)

- Expected to be the first one to acquire another player

- Already running experiments with drone delivery

‍

Zepto

- Strong funding: $60m+; Glade Brook Capital, Nexus Venture Partners and Y Combinator

- Young Blood: Founded by two 19-year-old Stanford University dropouts

- Single business model will help them to focus all energies here

- Expected to be the first one to be acquired (my bet is on Swiggy!)

‍

Dunzo

- Strong brand trust, social media presence

- Leader in delivery, strong fleet of delivery partners

- Backed by Google (can it leverage Google’s data to predict demand by pin code?!)

- Might be acquired by Reliance or TATA

Big Basket

- Strong experience of grocery delivery since 2011

- Backed by TATA

- Existing subscription-based essentials delivery service, BB Daily

- Launching offline stores as well

Some International Players

JOKR: US, South America

Deliveroo: London, UK

Getir: Turkey, UK

Gorillas: Germany, UK

Zapp: Britain

Dija: London, Paris, Madrid

‍

If you liked the analysis, help us by sharing this with your network