Swiggy is setting up a technology centre in Chennai and is looking for engineers to work on “location intelligence”, sources told Moneycontrol, an indication that the startup wants to evolve beyond food to deliver groceries and other daily essentials to its customers.
It has also rented office space in the commercial district of Nungambakkam in Chennai, the sources said. The Naspers-backed unicorn, which is reportedly burning $40 million a month, is downsizing cloud kitchens and investing aggressively in improving technology to get into new businesses verticals as the economic climate gets tough.
Confirming the development, Swiggy said it hired Pradnya Karbhari to lead the team in Chennai. The company is looking for senior software and machine-learning engineers to join the team.
“Our goal is to leverage AI to build long-term capabilities and highly scalable systems that will enhance aspects of the business as well as the consumer experience,” Dale Vaz, head of engineering and data science at Swiggy, said.
With its core food delivery orders seeing a more than 40% drop and no signs of recovery in the coming months, Swiggy needs alternate business avenues to remain relevant.
Vaz said the team comprising artificial intelligence, data science, engineering and quality assurance experts will work on location intelligence by building AI and big data.
Karbhari, assigned to lead the 10-member team, comes with a decade of experience in Google. Before joining Swiggy earlier this year, she was running her own venture Makesto Infotech since 2016.
Location intelligence is the key for any hyperlocal delivery platform to succeed, since their financials are measured at a cluster level. For instance, deliveries in Indiranagar in Bengaluru might make money, while those in nearby HSR Layout might not.
To build a sustainable delivery business, Swiggy has to identify and understand the clusters where it can get order volumes, shops it can rope in for supplies and the areas where it will need to set up virtual stores. This team might be key to Swiggy’s hyperlocal endeavour.
With social distancing the new normal, consumers will prefer to get groceries delivered at home and Swiggy wants to make the most of the opportunity. It started experimenting with alternate delivery businesses since 2019 but the coronavirus outbreak has made this a priority.
“Our estimates suggest food delivery will get back to 100% of pre-Covid order volumes only by next year April-May, hence for someone with a presence in so many cities and a massive delivery fleet, groceries is a natural target segment,” said Rohan Agarwal, director at advisory firm Redseer.
The company is testing Swiggy Genie for hyperlocal deliveries and dark shops or virtual stores under the brand name Urban Kirana.
“Swiggy needs to revamp its technology capabilities to support grocery deliveries, it needs more accurate information on local stores and needs to track their inventory in real time, it is not the same as delivering food,” said a top executive at a cloud kitchen startup that works closely with the company.
As the business face challenges, the company will not hesitate to pull the plugs on verticals not making money and the Access kitchen business seems to be one such vertical.
“Swiggy has decided to temporarily shut down some of the Access locations where we don't foresee either you or us making enough money to cover our costs,” said Swiggy in a communication to a restaurant partner, a copy of which was seen by Moneycontrol.
This is a very different language for a company known to burn cash in a fierce competition for market share with rival Zomato.
But will the shift pay off or will it be another cash-burning exercise?
Agarwal of Redseer said grocery was a very tricky category, margins were wafer-thin, unlike the food delivery business where aggregators could command 20 to 25 percent commissions from restaurants.
At the same time, if these platforms partner with local kiranas instead of competing with them, there was a massive business opportunity in on-demand delivery of supplies, he said.