India's burgeoning quick commerce marketplace is set to see heightened activity as newly profitable Blinkit plans to challenge players such as Swiggy Instamart and Zepto on their home turf.
Alongside Zomato Ltd.'s Q4 earnings, the company's quick commerce acquisition Blinkit announced that it has turned adjusted Ebitda positive in March. "Adjusted" refers to the fact that Zomato reports financial metrics without factoring costs related to employee stock options.
Zomato had acquired Blinkit, then known as Grofers, in 2022 for Rs 4,447 crore in an all-stock deal. The market hadn't reacted kindly after the deal was announced, since it was heavily loss-making at the time and the stock had slumped by 20% in six sessions.
Since then, Blinkit has been a turnaround story and now a larger driver of shareholder value, carrying more potential than the food delivery business, which has been soft over the past few quarters.
Store Expansion
Blinkit was founded 11 years ago and today, it operates 526 dark stores, which are strategically located warehouses that are the last-mile delivery hubs to fulfill these 10-minute deliveries.
It has expanded steadily over the past few quarters, with a 75 net new stores added in Q4 FY24. However, it will now add another 474 stores in the next 12 months, nearly doubling its store count, setting the stage for a rapid, aggressive expansion.
Addressing the question of growth versus profitability in the shareholders' letter, Blinkit founder Albinder Dhindsa clearly pointed towards growth being the impetus right now.
"One of the key vectors for growth for us right now is store expansion. In Q4 FY24, we added 75 net new stores, taking our total store count to 526. For comparison, this is more than the number of stores we added in the three preceding quarters cumulatively," he said.
Dhindsa added that in the current quarter (Q1 FY25), Blinkit will add another 100 stores.
"At this point, we are aiming to get to 1,000 stores by the end of FY25. With this aggressive store expansion planned (almost 2 times the store count in 12 months), the overall adjusted Ebitda in our business is likely to hover around zero for the next few quarters. In a steady state, we expect a 4-5% adjusted Ebitda margin (as a percentage of gross order value)," he said.
Turf War
But, where will Blinkit expand?
Blinkit's home base is Gurugram, where it operates out of and naturally, has a better market share and advantage here. But in cities like Bengaluru and Mumbai, where Swiggy Instamart and Zepto are based, Blinkit is underpenetrated.
"Our second largest city by gross order value, Bengaluru, is less than 30% of Delhi NCR’s GOV (our largest market), with a similar gap in store count. The job for us over the next few quarters is to get Bengaluru and other large cities like Mumbai and Hyderabad to match the penetration of Delhi NCR, both in terms of store footprint and GOV," Dhindsa said.
In addition to the horizontal, geographical expansion, Blinkit will build vertically as well, much in line with the way quick commerce is shaping up. All incumbents have added categories over the past few months, delivering electronics, toys, clothes, footwear, consumer durables and many other high-ticket items as well, diversifying and premiumising beyond plain grocery.
For comparison, Swiggy Instamart has around 500 dark stores across India, while Zepto operates 340 dark stores as of 2024, according to data from Statista.
With e-commerce majors Amazon and Flipkart also set to enter the arena soon, Blinkit's doubling of stores is seen as a way of shoring up its base before better-funded conglomerates enter the space and make a splash.
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