Why Zomato hits pause on Blinkit integration to focus on building super brandsWhy Zomato hits pause on Blinkit integration to focus on building super brands

As per information circulating among individuals with knowledge of the subject, Deepinder Goyal, the founder and CEO of Zomato, stated that the adoption rate of hyper applications in India is comparatively lower than that observed in China. He emphasised that Indian consumers have a propensity to prefer well-established, recognisable brands to the notion of powerful applications. The aforementioned communication was transmitted to the upper management of Zomato, underscoring the inclination of Indian consumers towards well-known and esteemed brands over the hyper app model.

This perspective is mirrored in how the company is approaching its business strategy. Zomato is maintaining a clear distinction between its food-delivery platform and its quick-commerce unit, Blinkit. They’re deliberately fostering Blinkit as a separate and distinct brand, emphasizing its independence from the food-delivery platform.

Following Zomato’s all-stock purchase of the online grocery firm for $570 million in 2022, industry observers and investors were eager to see how Blinkit would integrate with its parent company in the food-delivery market. Following the purchase, business management told investors that integrating Blinkit with Zomato, especially in terms of using its delivery fleet, was likely to improve operating efficiency. This move was announced as part of the publicly traded company’s profitability plan.

According to Zomato insiders, the company has altered its strategy. Originally, the intention was to achieve a more extensive integration of Blinkit within the organisation; however, a revised strategy has been determined. By leveraging synergies with its B2B supplies division, Hyperpure, and by including a tab on the Zomato app that directs users to Blinkit, Zomato intends to concentrate Blinkit’s integration.

On the contrary, Swiggy, the principal competitor of Zomato, has adopted an alternative strategy by seamlessly integrating its quick-commerce platform, Instamart, into its primary application. Substantially investing in this facet of their business (in excess of $700 million), Swiggy has capitalised on its delivery fleet and loyalty programme.

According to a senior executive at Zomato, the primary objective of the organisation is to establish robust individual brands. Aiming to achieve synergies across multiple organisational sectors, the company is preoccupied with the infrastructure in order to guarantee a seamless customer experience.

Although integrations have the potential to reduce expenses, analysts advise against overcomplicating operations. Streamlined and open disclosure of the performance of independent businesses provides investors with a more comprehensive understanding. The focal point is the preservation of simplicity while avoiding superfluous intricacies, a pattern that has been noted in other modern enterprises.

According to these authorities, any additional consolidation of Zomato and Blinkit must be evaluated in terms of three critical factors: operations, customer experience, and capitalising on fixed costs.

Despite emailing Zomato a request for comment, no response has been received as of yet.

Delivery fleet

Zomato’s operational style illustrates a key distinction between their meal delivery and quick-commerce businesses. Rakesh Ranjan, Zomato’s food delivery CEO, emphasised the uniqueness of Blinkit’s hyperlocal operations in comparison to Zomato’s larger delivery network. He emphasised how Blinkit’s riders, who service orders from dark businesses, are well-versed in their surroundings. Unlike Zomato’s fleet, which covers greater regions with no defined return point, these riders are assigned to particular establishments and travel without the need of maps.

Zomato, which has over 400,000 delivery partners in India as of September 30, 2023, sees limited integration opportunities on the rider side because to the fundamental distinctions in the nature of these positions.

Ranjan highlighted that Zomato’s current emphasis on customer integration entails transferring customers from the Zomato app to Blinkit. There are currently no plans to integrate Blinkit services into Zomato’s Gold reward programme.

Swiggy, on the other hand, applies its Swiggy One reward programme to both food and grocery orders from Instamart, demonstrating a distinct strategy to integrating loyalty benefits across its platforms.

Operational leverages

Analysts perceive Zomato’s integration of Blinkit and Hyperpure into their sourcing operations as a calculated manoeuvre aimed at attaining cost efficiencies and operational benefits. This integration is providing advantages for both organisations through the consolidation of specific expenditures and the utilisation of shared resources.

This strategy is materialising primarily in two ways. To begin with, the larger facilities that were previously employed by Blinkit to supply their underground stores have been consolidated into Hyperpure. Additionally, cost reductions have been achieved across multiple domains, including human resources, transportation, and procurement, which pertain to the backend operations. These optimisations serve to enhance the group-level expense structure of the organisation as a whole.

Analysts observe that historically, e-commerce companies have made substantial investments in infrastructure development, including the establishment of underground stores and dependable supply chains. At present, these businesses, including Zomato, are attempting to convert these fixed expenses into assets through revenue maximisation on the same recurring outlays. This transition is critical in their pursuit of attaining profitability. Additional market participants, including Zepto, headquartered in Mumbai, and Swiggy, which is conducting an Instacafe pilot in Bengaluru, are investigating comparable approaches in an effort to increase order sizes and margins. Similar to its competitors, Blinkit is diversifying its product line to include non-grocery items in an effort to increase average order value and stimulate revenue growth.

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