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India’s Swiggy, the food delivery group backed by SoftBank, will seek to gain an edge over its listed rival Zomato by shifting the bulk of its business to deliveries of groceries and other goods.
Sriharsha Majety, Swiggy’s co-founder and chief executive, told the Financial Times that non-restaurant food deliveries made up about a quarter of the company’s revenues but it wanted to bring this to more than 50 per cent in the coming years.
Swiggy has launched several alternative services, including grocery delivery and courier service Genie, and last month completed a $1.25bn fundraising round involving SoftBank, Prosus and others designed to propel growth in these areas.
“Some of the businesses are in a really exciting place where they can go from here to the next level. Some of them will be larger than the [restaurant] food-delivery business in the next four or five years,” Majety said. “I want to come back in a few years and talk about the story of a business being larger than food.”
Swiggy’s plans come as Zomato completed its $1.25bn listing last month. Zomato’s IPO, the first by a large Indian tech company, was well received by investors hungry to participate in a record stock market rally despite the company having never turned a profit. Its shares are up 80 per cent from their issue price.
Majety said Swiggy hoped to list but did not provide a timeline.
Swiggy’s plans to diversify highlight the persistent struggle to build a profitable business in food delivery. Average order values in India of $5 or less, compared with more than $30 in the US, have prompted some analysts to question the sustainability of the business.
Online grocery deliveries represent a much larger opportunity. Indians still overwhelmingly rely on small local shops and street hawkers for their groceries, and analysts believe online sales will grow faster than other ecommerce sectors. Brokerage Motilal Oswal expects the online grocery market to grow 59 per cent a year to $18bn by 2024.
Satish Meena, an independent analyst based in Delhi, said Swiggy needed to branch out beyond restaurant food if it wanted to continue scaling up. “We’ve passed the high-growth period [in food delivery]. It’ll take more time to add more customers and orders,” Meena said. “They have to figure out other ways.”
While Swiggy and Zomato have effectively squeezed out their erstwhile food delivery competitors, such as Uber Eats, a number of large companies are targeting the online grocery sector. This includes Mukesh Ambani’s JioMart, Tata-owned BigBasket and Amazon.
Majety said Swiggy would benefit from its existing base of loyal high-income customers, who were already used to ordering from restaurants on its platform.
He said they were targeting a market of “close to 100m” Indians, though some analysts say in practice the urban, high-income ecommerce market is likely to be smaller in the short term.
“There are many players competing,” he added. “It’s intense . . . but for the niches we’re going after we feel really good.”
Majety said he hoped to eventually build a platform that provided a range of services to urban consumers. “We’re also not wedded to the idea of delivery. For us the idea is all about providing convenience to consumers. Delivery happens to be one way.”