Zomato Ltd is one of the biggest food delivery giants in India. It has abandoned its plans to diversify into delivering groceries. This has happened for the second time in two years. It is because they cited gaps in infrastructure in a highly competitive online grocery market.
Zomato wrote a letter to its grocery partners on Friday, 10th September. In the letter, the company clearly mentioned, “Over the last 2 months of operations, we have had a few important realizations. Store catalogues are very dynamic and inventory levels change frequently. This has led to gaps in order fulfilment, leading to poor customer experience.” In the letter, Zomato added, “In the same period, the express delivery model with under 15-minutes delivery promise and near-perfect fulfilment rates, has been getting a lot of traction with customers and expanding rapidly.” They further said that it was extremely difficult to pull off such a model with high fulfilment rates consistently in a marketplace model like theirs. A copy of this letter has been reviewed by Mint.
For the first time, Zomato poked its nose into the e-grocery category in April last year. They did it in a bid to exploit a surge in demand for e-groceries during the first wave of the pandemic. Recently again, it announced its plans to restart grocery offerings on its application. It began pilots in Delhi-NCR in August. The Mint emailed queries on Sunday, 12th September. To this a spokesperson from Zomato replied, “We have decided to shut down our grocery pilot as of now and have no plans, whatsoever, to run any other form of grocery delivery on our platform. Grofers has found high-quality product market fit in 10-minute grocery, and we believe our investment will generate better outcomes for our shareholders than our in-house grocery effort.”
Recently, Zomato invested about $100 million in e-grocery unicorn Grofers and its wholesale unit Hands on Trades Pvt. Ltd. This also pivoted to the under the 10-minutes delivery model. Zomato holds 9.3% shares in both Grofers and Hands on Trade. Zomato will continue to operate its business-to-business essentials. The spokesperson of Zomato added that it will also provide grocery delivery services for the restaurants through Hyperpure.
The shift-in strategy of Zomato comes at a time when its sheer rival Swiggy is levelling up its game in grocery and essential service delivery. They are doing it through Instamart in Delhi-NCR as well as in the key metros of Mumbai, Chennai and Hyderabad. Instamart started in August 2020. It has a strong presence in Bengaluru which is Swiggy’s home market.