Swiggy Instamart…Never wait for groceries again?

It was a lazy Sunday, and I was busy cleaning up my mailbox and came across an email from Swiggy in the ‘Promotions’ folder.

It had a catchy subject line, which said ‘Launching tomorrow: A Party that survived 2020’. The banner had RCB featuring the launch of Swiggy instamart:

I thought to myself, what so insta about it. Swiggy already had tied up nearby Fruit & Vegetables Shops, Meat Stores, Pet Stores, Gourmet Stores, Super Markets, etc. during COVID-19 induced lockdown in April 20 and was utilizing its fleet to deliver the items.

A quick search on the net revealed that ‘instamart’ was Swiggy’s new venture in hyperlocal grocery, this time through ‘dark stores.’ These stores exist online and serve only the orders placed by the customers online.

Swiggy’s instamart offers to provide benefits:

• Delivery in 30–45 Minutes
• Operational between 7:00 AM to 1:00 AM (You read it right…!!)
• Free delivery beyond order value of Rs 299 (Launch offer)

On a glance, in the instamart section of the Swiggy app, I found it had ~ 2,500+ SKU’s spread across various categories ranging from Fruits & Vegetables to Home Cleaning.

Wow! That’s an excellent start….!

This launch brings instamart directly in competition to BigBasket’s Express Delivery and Dunzo’s Xpress Mart, which also deliver groceries within 30–60 minutes. While BigBasket manages its stores, Dunzo ties up with local retailers to maintain its stores by providing technology, logistics, and demand insights. Even heard of Flipkart launching Quick, in some parts of Bengaluru on a trial basis.

For a given Pincode, I quickly compared the prices of a few everyday items offered by instamart and Express Delivery, and the results are:

Not much of a difference from a pricing perspective; it’s just that Express Delivery charges Rs 30–45 (depending in the City) towards delivery charges, whereas instamart is currently running a campaign of free delivery beyond Rs 299 order value.

While it is just a start, the unit economics for an instant hyperlocal deliveries can be:

• Average Order Value (AOV) to be ~ Rs 400- Rs 800 (considering the weight restrictions that a rider need to carry on a 2-Wheeler)
• While the AOV is 2–4X of the standard food delivery orders by Swiggy, the margin on groceries will be significantly lower than the food business (sub 10%)
• Delivery costs per order can be in the range of ~ Rs 40 — Rs 60

Unlike the past, I don’t feel that none of the existing players will play a pricing/deep discount game (Fingers crossed, and not commenting about JioMart); the financial success of instamart by Swiggy will ultimately depend upon:

• How effectively instamart meets the fill rates in comparison to the likes of BigBasket, which claim 99.5% fill rates (and returns)
• On-time delivery &
• Managing the delivery costs by optimizing the existing fleet of delivery personnel

Finally, I tried my first order on instamart, and it was a breeze. It started at 12:10 PM and ended with a tring…tring notification on MyGate app at 12:53 PM.

The delivery also had a note from the Co-Founder of Swiggy:

Here’s wishing Swiggy instamart & RCB all the very best — Ee Sala Cup Namde!