Foodtech giant Zomato has reportedly decided to stall the integration of its quick commerce arm Blinkit to focus on building super brands.
The decision rolls up to a message that Zomato’s founder and chief executive officer Deepinder Goyal passed on to the company’s top management: focus on building “super brands”, and not “super apps”, ET reported.
“In India, super apps haven’t proven as successful as they have in China and Indians lean towards super brands,” said Goyal.
Zomato’s strategy is evident in its decision to maintain a distinct separation between its food delivery platform and quick-commerce unit. The focus is on developing Blinkit as an independent brand.
Since Zomato acquired Blinkit, there has been anticipation of merging two apps into one platform, especially as its rival Swiggy operates quick commerce Instamart on the main app itself.
Back in 2022, Zomato acquired quick commerce startup Blinkit for INR 4,447 Cr ($568 Mn) in an all-stock deal. After the acquisition, Zomato’s management informed analysts that integrating Blinkit, especially its delivery fleet, would improve efficiencies and contribute to the publicly listed firm’s path to profitability.
However, the current plan has shifted, ET reported citing sources. Zomato has now decided that Blinkit’s integration into the firm will primarily focus on sourcing synergies with its business-to-business supplies vertical, Hyperpure. Additionally, a tab on the Zomato app will guide users to the Blinkit app.
“At a corporate level, the message is to build brands and the most meaningful synergies are being driven — between not just food and Blinkit but also among the different verticals that the broader organisation runs — are happening mainly on the backend to ensure it doesn’t impact customer experience,” a senior executive told ET.
In contrast, Zomato’s chief rival Swiggy has chosen to integrate its quick commerce vertical, Instamart, directly into its main app. Swiggy is leveraging its loyalty program and delivery fleet, with investments exceeding $700 Mn, to strengthen its position in this business segment.
Blinkit turned contribution positive for the first time during the quarter ended September 30, 2023 (Q2 FY24).
In its shareholders letter, released along with its financial statements for Q2 FY24, Zomato said Blinkit’s contribution margin as a percentage of gross order value (GOV) in the overall business improved from -7.3% in Q2 FY23 to +1.3% during the quarter ended September 30, 2023.
Blinkit recorded 45.5 Mn orders during Q2 F24, up nearly 24% quarter-on-quarter (QoQ) compared to the 36.8 Mn in the previous quarter, and up 74.3% year-on-year (YoY) compared to Q1 FY23, when it recorded 26.1 Mn orders.
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