Blinkit mess: Quick-commerce rivals feast on as sales surge, marketing costs drop

A Blinkit delivery personal is seen on road in Kolkata , India , on 9 February 2023 . Zomato backed BlinkIt delivery and others like Zepto , Swiggy has become new face of quick and cheap e-commerce logistic delivery partners in India during and after COVID era according to reports. Backed by billions in foreign investment and army of low paid harried drivers , the new norm in quick delivery is taking the Indian e-commerce industry by storm , raising many question on driver safety and need for 10-minute delivery services amidst the mix. (Photo by Debarchan Chatterjee/NurPhoto via Getty Images)

As Zomato-owned Blinkit grapples with strikes and store shutdowns in Delhi-NCR, its quick-commerce rivals such as Swiggy Instamart, Zepto, Dunzo and BigBasket saw their order volumes surge up to 40 percent and marketing costs drop by as much as Rs 1 crore in the last five days, according to industry insiders.

This comes at a time when tech companies across the board, and especially in e-commerce, are hunkering down to improve their profitability amid a long funding winter.

“We are getting the orders and data of tens of thousands of their customers. It’s giving us free marketing and we have saved as much as Rs 1 crore… This is the amount we would have to spend to get these new users,” said a senior executive of a quick-commerce player that has seen order volumes surge 30-40 percent week on week, asking not to be identified.

Two other executives at different quick-commerce firms said they were seeing order volumes rise by 25 percent and 30 percent. However, they added that these new users won’t have good retention on the platforms as consumers tend to shift back to their go-to app whenever things get back to normal unless Blinkit fails to resolve the issue this week.

“For example, we saw our food delivery orders almost double when one of our rivals saw a strike in Chennai recently. But it was back to normal when the strike ended,” said one of the executives, requesting anonymity.

The episode at Blinkit, and the quick-commerce space in general, is largely a repeat of what food delivery players like Zomato and Swiggy had experienced earlier. About five years ago, the payout to a food delivery partner was around Rs 90 but has now reduced to about Rs 57-60, analysts said.

“These kinds of strikes are common when businesses reach a certain scale and then they need to focus on profits, so the incentives start tapering off. It’s fair to say that other quick-commerce companies will also follow suit and soon reduce incentives because even they need to show profits,” said Swapnil Potdukhe, assistant vice president, JM Financial. “At the same time, there are several people exiting the quick-commerce industry because of demand pressures, which has resulted in an oversupply of delivery partners and, hence, low payouts.”

Meanwhile, a Blinkit spokesperson on April 17 said that the strike is nearing an end and most dark stores are getting operational in the Delhi-NCR region. Unlike food delivery, in which a delivery executive may have to fetch orders from restaurants in different parts of a city, the quick-commerce model relies on a group of gig workers being attached to particular dark stores in certain neighbourhoods from where deliveries are made.

Also read: Blinkit permanently shuts down some dark stores amid delivery workers' strike

Around 2,500 delivery workers of Blinkit have been on a strike since last week in Gurugram, after the company reduced the fixed payouts per delivery from Rs 25 to Rs 15. More workers are striking against this move in Delhi and Noida.

According to an industry executive, the hyperlocal delivery sector's modus operandi is to cut delivery fees paid to riders whenever the volume of orders rises in an area. The companies make a rough calculation such that a delivery worker gets to earn around Rs 15,000 per month in a top metro. This calculation is again based on the assumption that the gig worker is logged on for 10-12 hours per day for 26-27 days a month.

"As the number of deliveries per worker per hour rises when the platforms' total orders in an area grow, the companies look to make their orders more profitable by cutting the payouts per order," the industry executive told Moneycontrol.

Meanwhile, a source close to the developments said that Blinkit will roll out new rate cards eventually to all of the dark stores in each city it is present in.

Multiple delivery workers said that Blinkit used to pay Rs 50 per order last year to its early batch of delivery workers and Rs 25 per order to those who joined a few months ago. On top of the per-order payouts, there also used to be fuel and delivery volume-based incentives, which could go up to Rs 1,400 per week in some cases. The protesting workers are also angry as these incentives have been gradually done away with.

“Initially, quick-commerce platforms like Blinkit were paying higher because they had to create a market and improve the customer experience, that was their focus. But now after they have reached a certain scale, most companies feel they don’t need to incentivise the ecosystem so much anymore and hence reduce the payouts,” an analyst said.

According to BSE filings, Blinkit delivered 3.2 crore orders to earn Rs 301 crore of revenue in the December quarter, while suffering an adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) loss of Rs 227 crore.

The company, formerly known as Grofers, was acquired in a Rs 4,447-crore deal by food delivery company Zomato in June last year.