Having copped the blame for testing corporate governance norms by investing in startups in which his company bought a stake later, Zomato founder Deepinder Goyal is playing it safe now. Wisely, he has stepped off the board of Urban Company ahead of Zomato-owned Blinkit launching similar services.
While that ensures Goyal avoids any possible charges of conflict of interest, it does little to reassure investors in Zomato of the future of Blinkit, the startup that it acquired last year for over half a billion dollars. Blinkit, suggest reports, will now offer handyman services such as chefs, spa and salon, appliance repairs, cleaning & pest control, electricians, plumbers, painters, of the kind that Urban Company has been doing for the last eight years.
Elusive Profits
Coming at a time when its gross merchandise value (GMV) slipped 4 percent in FY22 while losses nearly trebled from Rs 558 crore to Rs 1,440 crore during the same period, the move suggests that the 10-year-long travails of the startup are nowhere near over. Another pivot suggests desperation for its current owner Zomato, which is still searching for the elusive profits in its core business. The company’s stock price is down 57 percent from the time it listed in July 2021 and any hopes it had that buying another loss-maker, Blinkit, would help stem the erosion of shareholder’s confidence have been dashed so far.
There’s little to suggest a rapid turnaround in Blinkit’s fortunes, notwithstanding the latest turn. The expansion into home services will bring the struggling company in direct competition with Tiger Global-backed Urban Company while also diffusing its focus from its original quick-commerce mandate. While Urban Company’s revenues have been growing exponentially, its losses too have been mounting in the face of rising expenses.
For Blinkit then, the move into home services isn’t an assurance of either easy revenues or profits.
It has been the story of the startup which began its journey in 2013 as an online grocery delivery service. The idea was good but Blinkit (then known as Grofers) wasn’t the first in the business. Big Basket, the market leader in online grocery and now a part of the Tata group, had launched two years earlier. Soon, there was a rush of new entrants including big boys like Amazon Pantry and Flipkart Supermarket, the Walmart-owned company’s online grocery business. In a crowded market, with funds rapidly drying up, Grofers soon reached the end of its line. A pivot to quick commerce followed and the company rebranded itself as Blinkit in December 2021 offering 10-minute deliveries of groceries. Once again, there was nothing original about what it offered. Flipkart Quick, Dunzo Daily, Ola Dash and Zepto were already promising deliveries in time frames ranging from 10 minutes to 90 minutes. Quick commerce itself soon faced headwinds despite the rising number of transactions as high cash burns kept profits in abeyance.
Need Unique Proposition
Pivoting is a rite of passage for startups. As Dalton Caldwell, partner at Y Combinator says “When you're at the earliest stages of your company, especially pre-launch or very near after-launch, changing your ideas constantly is kind of the norm.” Thus, Instagram started out as a location-based check-in service before turning to its current avatar. Netflix was distributing DVDs via the US Postal Service before Reed Hastings decided it would make its own digital content. But for each such successful turnaround, there are thousands of startups that finally ended up in the bin because they kept chasing newer ideas for success. The thing is it is easy enough to pivot from one business. The difficulty is figuring out what business to pivot into. As Caldwell warns, a good reason not to pivot is that “you just hear there's some hot new thing” or “because someone raised money for a hot new thing.”
A decade isn’t a very long time in the life of a startup, provided it has been able to identify its unique proposition. Blinkit’s problem is that it is struggling to find itself even after 10 years. At a recent event, Infosys co-founder NR Narayana Murthy stressed the need for entrepreneurs to establish unique solutions in the marketplace. For Blinkit and its owner Zomato, that’s where the big challenge lies.
Sundeep Khanna is a senior journalist. Views are personal and do not represent the stand of this publication.
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