Indians are becoming addicted to 10-minute food delivery apps, crowding out small retailers.

In a middle-class suburb of Mumbai, warehouse workers at SoftBank-backed Swiggy race against time to deliver orders in 10 minutes. Their speed is measured in seconds on a screen where red warnings flash in case of slowness.

Outside in the sweltering heat, Swiggy bikers, sporting the company’s signature bright orange T-shirts, frantically gather packaged grocery orders for delivery nearby, while others return to take care of another delivery assigned on their app and waiting.

“Ideally, the picking process should be completed within 1 minute and 30 seconds,” says Prateek Salunke, warehouse manager.

Swiggy warehouses are springing up across India to deliver everything from milk and bananas to condoms and roses in minutes – a business model that is changing the way Indians shop.

This business model is changing the way Indians shop. It also threatens the millions of mom-and-pop stores that for decades have dominated the grocery sector in a country where large supermarkets are relatively rare and located in wealthier neighborhoods or in shopping malls.

Indians have long relied on visits to small neighborhood stores to buy groceries or get free deliveries over the phone, before the e-commerce boom sparked by Amazon and Walmart’s Flipkart over the past decade.

But the U.S. giants, which offer same-day or next-day deliveries depending on location, aren’t as fast to groceries as Swiggy and rivals Zomato’s Zepto and Blinkit, which are driving a boom in “fast trade”.

Goldman Sachs said in April that fast deliveries accounted for $5 billion, or 45%, of India’s online grocery market, which currently stands at $11 billion. As consumers prioritize convenience and speed, fast commerce will account for 70% of the online grocery market, which is expected to reach $60 billion by 2030, according to Goldman Sachs forecasts.

Swiggy, which is in the process of going public, started in 2014 as a food delivery company to restaurants and is valued at $10 billion, but is now shifting gears to bet more on the grocery business of “last minute” in India, the third largest retail market in the world after China and the United States.

“We are training ourselves to focus on a much larger market than food,” reads a confidential Swiggy strategic document dated December 2023 and seen by Reuters, about its Instamart service.

His target? “Urban consumers aged 21 to 35 who are time-poor and value convenience,” according to the document.

Swiggy did not respond to requests for comment on the document or its general strategy.

The company doubled the number of its warehouses to 500 in 25 cities last year and plans to increase them to 750 before April 2025, said an executive from one of Swiggy’s financial investors, which also includes Prosus, Qatar Investment Authority and GIC of Singapore.

Globally, COVID-19 lockdowns boosted fast-delivery startups, helping companies like Turkey’s Getir expand, before seeing interest dissipate as shoppers returned to retail outlets physical after the pandemic. The Luxembourg company Jokr withdrew from the American market in 2022.

India is seeing a different trend.

Sumat Chopra, partner at consultancy Kearney, said fast-trading companies benefit from the availability of cost-effective warehouse space and are “pampering” Indian consumers who have long been accustomed to ordering by phone for just a few items from their local stores.

Swiggy will even accept an order for a single mango, although it can cost about twice as much as walking to a nearby store.

Many consumers are willing to pay more to save time.

Natasha Kavalakkat, 27, a lawyer in Mumbai, who has a busy schedule, uses fast delivery apps like Swiggy and Zepto to order apples and bread. She says having juice packs delivered in minutes just before a party has been a game-changer.

“It’s so convenient.

THE VICTIMS OF THE BOOM

The rise of fast-paced commerce means many small retail stores are under pressure.

Grocer Prem Patel, from suburban Mumbai, has seen his business boom in recent years, allowing him to renovate his store and install air conditioning. Today he is no longer happy.

“No one buys milk in malls and supermarkets. That’s what made us unique. But these apps have changed the game,” says Mr. Patel, whose daily sales have halved to around 25,000 rupees ($300).

Four retail associations in four Indian states, representing 90,000 of the country’s approximately 13 million grocery stores, told Reuters that monthly sales were falling by 10% to 60% for some of them due to the boom. fast commerce applications.

Some brick-and-mortar stores are responding by becoming more comfortable with technology.

Hiren Gandhi, who chairs a retailers association in Gujarat state, has asked his members to create WhatsApp groups to take orders and deliver goods quickly within a 6.4 km radius.

“About 500 stores have taken steps to innovate and maintain their business,” he said.

HIGH REVENUES, BUT NO PROFITS YET

Swiggy’s financial data for its fast commerce division Instamart is not public, but the internal document shows that the annualized order value tripled from $340 million in December 2021 to $1 billion in September 2021. last year. The company is still loss-making, the Swiggy investor executive said.

Swiggy’s main rival, Zomato, is India’s largest food delivery company, but acquired fast commerce company Blinkit in 2022. Goldman Sachs said Blinkit is more valuable to Zomato than food delivery and that it is expected to book orders worth $2.7 billion this year, almost 60% higher than last year’s estimates.

Zomato, in a regulatory filing in May, said Blinkit had broken even for the first time, but that it expected its operating profit “to hover around zero over the next few years.” next quarters. The company did not respond to a request for comment.

Analysts warn that relying only on big cities to attract customers and spending heavily on promotional discounts and marketing to keep profits low could prove risky for fast-trading companies in the sector low-margin groceries.

But Swiggy and Blinkit are already diversifying beyond groceries by offering higher-margin products.

On Swiggy’s app, shoppers can order fitness and electronics products such as a $132 Xiaomi air purifier, while Blinkit said it sold a record number of roses, bouquets and teddy bear in a single day on Valentine’s Day in February.

Swiggy’s Instamart was launched as an “Indian version of 7 Eleven (on the cloud)”, according to an internal document, but “we are changing our positioning” to become an “online supermarket”.