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Dunzo enters, Grofers speeds up, Swiggy expands, Zomato experiments, BigBasket holds on: Here’s what’s happening in the grocery delivery market

With Dunzo being the latest entrant in the grocery delivery market, Tata’s plan to invest in it has hit a roadblock; nearly all the major delivery services listed here are pitching faster delivery times. 

While the pandemic had a negative impact on most aspects of the Indian economy, one of the few segments that not only survived but grew during this period is the online grocery delivery market. Consulting firm Redseer expects this market to grow at a compound annual growth rate (CAGR) of 8% and become an $850 billion market by 2025. No wonder existing players are doubling down and new ones are eyeing a slice of the pie. Here’s a round-up of what’s happened recently in this space.

Dunzo starts grocery delivery

Hyperlocal delivery platform Dunzo has now entered the online grocery delivery space with Dunzo Daily, the company stated in a blog post on August 17. The Dunzo Daily service is currently available in Bengaluru with over 2000 products on offer.

Dunzo is pitching its new service as “ultra-fast grocery delivery,” promising to deliver orders in 19 minutes. The service has been active in Bengaluru for a few weeks now and Dunzo claims that it is growing over 25% week on week with customers using the service 2.5 times a week. The company plans to eventually expand to the top 20 cities of the country using its network of co-owned and operated mini-warehouses.

Meanwhile, ETtech reported that Tata’s plan to invest in Dunzo has hit a roadblock because the latter does not want to give up majority control. Interestingly, Tata recently acquired majority control in BigBasket, which is a rival to the up-and-coming Dunzo Daily, but both companies are figuring out a way to work together (more on this later in the post).

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Grofers to offer 10-minute deliveries in select cities

Grofers, which currently operates in 43 cities across India, announced on August 17 that it will bring down the delivery time for the majority of its customers in 10 selected cities to under 10 minutes within the next 45 days. Currently, the average delivery time is 15 minutes, the company said.

The cities that will get the 10-minute service are Delhi, Gurugram, Mumbai, Bengaluru, Hyderabad, Kolkata, Jaipur, Ghaziabad, Noida, and Lucknow.

This will make Grofers the fastest grocery delivery service. Swiggy Instamart and Dunzo Daily follow closely behind with 15-20 minute delivery windows but with a smaller selection of products as well as limited cities. Meanwhile, Flipkart has a 90-minute delivery window while Amazon Fresh has a two-hour window.

Grofers recently received $100 million in funding from food delivery start-up Zomato, valuing Grofers at over $1 billion and pushing it into the unicorn club.

Zomato re-enters space but doesn’t want Grofers help yet

Zomato first indicated an interest in the grocery delivery market in April 2020 when it entered this space through Zomato Market, but the company exited the space in June the same year. However, in its red herring prospectus, filed at the time of its initial public offering in July 2021, Zomato said that it was in the process of rolling out a grocery delivery marketplace on its platform on a pilot basis, indicating that it is reviving Zomato Market. “We are coming back to experiment and see how we build this hyperlocal part of the business,” Zomato co-founder Gaurav Gupta said at a press conference on July 8.

The grocery delivery service began appearing in select areas and for select users in Delhi last month.

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Although Zomato recently acquired a 9.3 percent stake in Grofers and could use this investment to ramp up its grocery offerings, Zomato cofounder and chief executive Deepinder Goyal told Economic Times: “The investment in Grofers is separate and we have our own grocery offering [Zomato Market] which is a marketplace model and sources from local stores. This is not on the back of the Grofers investment. For now, we are not drawing any synergies from Grofers. There is nothing planned right now, it is still a long shot.”

Swiggy Instamart expands to five new cities

“Our biggest investments will be in our non-food businesses that have witnessed tremendous consumer love and growth in a short span, especially in the past 15 months of the pandemic,” Swiggy CEO Sriharsha Majety said after the company closed its $1.25 billion investment round last month.

And as promised, Swiggy earlier this month expanded its grocery service Instamart to five more cities: Delhi, Mumbai, Hyderabad, Chennai, and Noida, MoneyControl reported. Previously, the service was available only in Bengaluru and Gurugram. Furthermore, Swiggy is promising 15-30 minute delivery times in these cities.

Amazon takes advantage of More

Earlier this month, Economic Times reported that Amazon, which is currently the second-largest player in this space along with Grofers, is enabling Amazon Fresh customers to pick up groceries from More retail stores. More was acquired by Amazon and private equity firm Samara Capital in 2019, with the former acquiring 49 percent.

The service is currently live in many pin codes in Bengaluru where consumers can pick up online orders from the nearest More stores within 2-3 hours. The model is similar to what the e-commerce giant follows in the US where it partnered with Whole Foods.

BigBasket retries hand at express delivery

Tata-owned BigBasket is currently the largest online grocery delivery platform in India with over 35 percent market share, but it faces increasing competition from existing players like Grofers and Amazon Fresh as well as new entrants like Swiggy, Dunzo, and JioMart. To keep up with this competition, BigBasket is working on improving its delivery speeds.

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Last month, in an interview with Economic Times, BigBasket cofounders Hari Menon and Vipul Parekh said that the company will launch express deliveries in the next few months, a service that it previously offered but pulled back from. “We have gone deep into three-four hour deliveries, in fact in most cases it’s two-three hours. Now, (hourly delivery) is what we are going to do next,” Menon told ET. “The focus is on setting up dark stores, bringing inventory and warehouse closer to the customer, and making sure the cold chain works better and faster and fresh produce can be delivered with ease,” he added.

ETTech reported that Dunzo is in talks with BigBasket to power its express deliveries. “The idea is to set up 1,500-2,000 sq ft dark stores which can be set up in different neighbourhoods. Both parties are keen to make it work and that’s where it is headed now. As per current discussions, the eventual plan is to take it to 25 cities with about 400-500 such dark stores,” a source told ET.

BigBasket will also likely get a push when Tata launches its proposed super-app. Tata first indicated its plan to launch a super app in August 2020 and said that the app will offer users a range of services offered by the Tata Group, including food and grocery ordering, fashion and lifestyle, consumer electronics and consumer durables, insurance and financial services, education, and healthcare and bill payments.

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