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App-based food delivery startup Swiggy is all set to launch 'Swiggy Stores', which will deliver to your doorstep household items like groceries, flowers, medicines among other things within an hour. Co-founder and CEO of Swiggy, Sriharsha Majety said that Swiggy aims to bring convenience to the doorstep of its customers. But, what does this mean for the company?
This initiative will first be launched in Gurugram, where the company has already partnered with 3,500 stores that include retail majors like Zappfresh, HealthKart, Apollo Pharmacy. The company, valued at $3.3 billion, reportedly plans to take the initiative to all major cities once it successfully pilots in Gurugram.
It is not clear yet what fee the company will charge from customers below an average ticket size order.
The growing market
Swiggy has now delved into the hyper-local delivery space that is becoming one of the most attractive avenues of Indian retail market, of which 60 percent is constituted by groceries. The company will now have to compete with the likes of BigBasket, Grofers and Dunzo, along with Amazon and Flipkart.
It is understandable that a growing company like Swiggy would want a share of this pie. India's online grocery market is expected to be worth between $400 billion and $600 billion presently and may reach $700 billion in the next three years, according to a report by Knowledge@Wharton. The sector has already seen a lot of activity, with Walmart's entry into the market through Flipkart, Amazon launching its delivery arm Pantry and BigBasket raising close to $300 million.
How will this move fare for Swiggy?
This new initiative is touted as a beneficial move by analysts. Swiggy has a strong delivery network in the country, with a strong presence in almost 80 cities. They have established themselves through food deliveries within an hour with a delivery staff of over 1.25 lakh. The company is banking upon these factors to make this a success.
"The transaction volume one can expect is huge. The business opportunity is huge, given that you already have a base of customers and an operational set-up," Rohan Agarwal at RedSeer Consulting, told Business Standard. He added that the app-based startup can maximize customer value by using its delivery fleet for diverse purposes.
However, some also believe that this would cost the company more than it brings in. Satish Meena, an analyst at Forrester Research, believes that this service faces the challenge that everything that the customers demand, may not be available at the same grocery stores. This could mean more time and money going out from Swiggy.
"The low-ticket orders may not justify the cost on delivery," Meena said, although he agreed that Swiggy's network will come in handy for this initiative.
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