I agree completely with your analysis. Most of people don’t understand Blinkit’s high growth is due to opening more dark stores and expansion to newer geographies. The most important metric is SSG (Same store growth), which Zomato, Blinkit don’t share. Also, given this sector has potential to affect millions of Kirana stores, Govt will certainly introduce some regulations. So, at this valuation, one should stay out of this.
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Its very easy choice for Govt. Quick Commerce employs thousands of direct employees, whereas Kirana stores provide incomes to millions of house holds. Also large unorganized labour works in Kirana stores or at FMCG distributor level. I don’t think govt’s will bring major policy changes, however, small changes like providing Health Insurance / PF benefits to its delivery partners or no special SKUs for quick commerce has potential to hurt bottomline of quick commerce companies.
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The present govt likes to replace unorganised players (kiranas) with organised players. Kiranas run business mostly on cash which is revenue loss for govt.
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Zomato does provide Average GOV per day, per store for Blinkit. This metric continues to grow quarter on quarter despite the rapid pace of new store additions. I presume new stores have a much lower GOV per store per day but offset by continued growth in more mature stores.
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₹54,500 crore in one week: Who are the heroes for Amazon, Flipkart amid festive shopping frenzy?
Time not far when Blinkit will join the race and starting doing weekly topline equal to current annual one.
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Deepinder on the potential of the events and entertainment industry
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The real threat to Blinkit and others is from players who don’t have to bear the overhead costs of setting up and running dark stores. JioMart is able to use Reliance’s vast network of offline stores and has started delivering in under 1 hour, which is already quick enough for groceries and other essentials. Other than food, nobody realistically needs anything worthwhile delivered in 10 minutes as opposed to 30 minutes or 1 hour. I mean, people would spend more than 10 minutes for just adding those many items to cart.
Makes you wonder “Is the market big enough for 7-8 players to co-exist?” I would think not. Also the fact that Flipkart and Amazon, who probably know the ins and outs of the Indian market after all these years, don’t see quick-commerce as lucrative enough to go big in is actually a red flag for the whole quick-commerce bull narrative.
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Further, Blinkit is expanding its SKU’s offerings to newer things which in turn leads to requirement of Bigger warehouse in congested urban areas as well as lower inventory turnover for many items, which can negative effects on Margins. Grocery is very difficult business but mixing grocery with Electronics as well as clothing is very difficult.
If you look closely, from the last few quarters the growth in average GOV per store is slowing.
It will obviously slowdown given the pace of new store openings. The fact that GOV per store per day is still growing QoQ suggests more mature stores are actually doing quite well.
Look at number of new stores opened in each quarter as a % of stores at the beginning of period. It is 21% in 1Q25 vs. just 2% in 1Q24.
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Flipkart just started quick commerce under the banner “minutes”. Does it make the red flag go away?
Ola, Uber, Amazon - all tried food delivery and gave up. That doesn’t make food delivery bad business.
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I think a profit margin of 5 percent is not optimistic. Actually a bear case profit margin would be 5 percent. An optimistic bet would be 12-15 percent. And base case 8 percent.
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I know that Flipkart has launched the pilot of Flipkart Minutes in a couple of cities. And Amazon also has quick commerce in its pipeline slated to be launched at some distant point next year. But they are barely just testing the waters in quick commerce and have not gone all-out despite all the hype, as I mentioned in my original comment (re-read my comment to avoid any misunderstanding).
Remember when Flipkart went all-out with social-commerce (Shopsy) when Meesho was disrupting the e-commerce market? We’re not seeing similar all-out efforts with quick commerce. Yes, the fact that they haven’t gone big in quick commerce yet is still a red flag on the sustenance of the quick commerce model.
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Flipkart already had the infrastructure for shopsy. Quick commerce is a different ball game, you need dark stores in many places to cover 15 min delivery and also you need different set of work force for this quick delivery. Their plan to venture into it after biting the bullet with food delivery speaks volumes about the potential of quick commerce.
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Only time will tell if the “potential” will convert to meaningful profits for all 6-7 players. Many players ventured into organized supermarket retail which was touted to have great potential about 15-20 years ago, but most of them are still loss-making or wound up (Future, Star, Spar, More, Spencer’s, etc), while only Reliance and DMart have managed to stay afloat profitably.
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If you have read my earlier posts you will realise that I am of the opinion that this will become a duo-poly like zomato, swiggy and ola, uber. Which two is what time will tell.
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Macquarie on Zomato vs Swiggy
Macquarie_Zomato_versus_Swiggy_Comparison;_Swiggy_appears_4_6_quarters.pdf (792.3 KB)
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In the whole article they kept saying zomato is way ahead of swiggy in all aspects but their Target price for zomato is -64% which is 100. (CMP: 277).
So are they suggesting not to apply for swiggy IPO?
Why do you think FK/ AZ will not get serious about it? They both have straight away risk of losing market share in convenience seeker category which happens to mostly be sitting in Metro / tier 1, which by and large were used to couple of days SLA.
Forget unit economics currently, not having a qcom strategy in place is serious threat to ecom company GMV.