Flush With Funds, Qcoms Eye Expansion
December 04, 2024 08:50
Illustration: Dominic Xavier/Rediff.com
Aryaman Gupta/Business Standard
Flush with funds and amid intensifying competition in the sector, quick commerce (qcom) companies like Swiggy Instamart, Zomato-owned Blinkit, and Zepto, have shifted into expansion mode.
While announcing its September-quarter results, management at Swiggy said its growth strategy for Instamart is based on hyperlocal expansion -- same store growth and densification in existing cities, and geographic expansion -- launching new cities.
'Instamart is rapidly growing its geographical footprint, and is now available in 54 cities (versus 27 cities in March 24) We plan to double our store count by March 25 (versus 523 in March 24), while increasing the average size of our stores by 30-35 per cent,' said the management at Swiggy in a letter to shareholders.
The company is replacing some of its older, small-format stores (2,500-2,800 sq ft) with larger ones (3,500-4,500 sq ft) that can house up to 20,000 stock-keeping units (SKUs). Additionally, Swiggy is rolling out megapods (8,000-10,000 sq ft) in top cities, which can house over 50,000 SKUs.
These megapods will serve consumers in 10 to 30 minutes with an extended selection of items beyond the top 20,000 SKUs.
'Overall, we expect to more than double our active dark store area to 4 million sq ft by March 25 (versus 1.5 million sq ft in March 24), through a combination of new store additions and larger-sized stores,' the management said.
The expanded dark store area with a larger selection is expected to lead to a higher share of user spends, and expansion of average order value (AOV).
According to Swiggy, its AOV has grown by 7.3 per cent in H1FY25, with expectations of double-digit growth annually for the foreseeable future.
Meanwhile, qcom major Zepto has also fast-tracked its expansion plans. "We are in expansion mode right now," Zepto CEO Aadit Palicha told Business Standard last week.
"Zepto is live in about 20 cities, having recently launched in Nashik, Chandigarh, Ahmedabad, Rajkot and Surat, among others. We are about to launch in Tier-2 cities like Vadodara, Kurukshetra, etc," he added.
The company, which, according to Palicha, currently operates over 600 dark stores, had initially planned to increase its store count to 700 by March 2025, which has reportedly been increased to 1,200.
Zepto recently closed a massive $350 million funding round from domestic investors ahead of its IPO. The firm has raised as much as $1.35 billion in 2024 alone, and is well capitalised to fuel its expansion spree.
Their Gurugram-based listed rival Zomato is also scaling its dark store footprint rapidly.
Last week, Zomato raised Rs 8,500 crore ($1 billion) through a qualified institutional placement (QIP), aimed at strengthening its balance sheet and fuelling its expansion plans. According to the company, as much as Rs 2,137 crore will be used to expand Blinkits network of dark stores and warehouses.
Blinkit had earlier announced plans to increase its dark store count to 2,000 by the end of 2026. As of Q2 FY25, the company operated 791 stores, up from 639 in the previous quarter.
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