Zomato to double down on quick commerce, lines up $400 million for two years

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Online food delivery firm Zomato has set aside $400 million to invest in quick commerce stating that this category offers a "huge addressable market" and is synergistic with its food delivery business.

"We are very bullish on the product-market fit, unit economics, as well as the growth trajectory of the quick commerce category. It reminds us of the food delivery category a few years ago when many platforms competed over a large and growing market but ultimately only the few who delivered exceptional experience to their customers survived," Deepinder Goyal, founder and chief executive of Zomato said in a statement.

"We are becoming increasingly confident in our decision to invest behind market leadership here with healthy unit economics. As a result, we are updating the upper bound of our potential investments in this category to $400m cash over the next two years," he added.

The company made an investment of $225 million last year across Blinkit (erstwhile Grofers), Shiprocket and Magicpin.

It must be noted that Zomato was also in talks with Blinkit's younger rival Zepto for an acquisition last year. The deal which was way above Zomato's current budget sidelined for quick commerce, however did not materialise then. The food-tech had offered Zepto a valuation of $1 billion.

Along with Zomato, rival Swiggy was also looking to acquire Zepto. Moneycontrol had reported about it in December.

According to Zomato, Blinkit has now set up 400 partner stores across the country through which it is enabling grocery delivery in 10 minutes. In December Grofers also pulled services from select pincodes where 10 minutes delivery wasn't working out. However, the company did not mention if it was reopeneing any of those pincodes.

Quick commerce, which is defined as the delivery of items under 45 minutes, is the new battlefield as players look to outdo each other by reducing delivery time of essentials to minutes. The segment in India is expected to grow 10-15 times over the next four years to become a $5 billion market by 2025.

Last month Zomato also announced a $5 million investment in Ad tech firm UrbanPiper for a 19 percent stake and $15 million in  B2B software platform Adonmo to acquire 5 percent stake.

The leading food-tech firm is also setting up a non banking financial company with an aim to offer short term credit to the delivery partners and restaurants.

"We believe we can add significant value to, and improve the experience of, our platform partners with this initiative without requiring Zomato to allocate significant capital. Over the next few years, our focus will remain creating a great experience for our stakeholders and helping to grow our overall ecosystem rather than optimizing for revenues or profits," Goyal said.

Last year, Zomato raised over $1.25 billion by listing on the public markets, comprising a fresh issue of equity shares worth Rs 9,000 crore and an offer for sale worth Rs 375 crore by existing investor Info Edge.