Quick Commerce helps Zomato scale new highs
What happened: Zomato's stock has been on a tear for a while, doubling from post-IPO lows to now top over 200 per share, thanks to growing momentum in the company's quick commerce business through its Blinkit subsidiary.
Big picture: the ultra-fast delivery of groceries and essentials is reshaping India's e-commerce landscape, creating new unicorns like Zepto, and reshaping strategies for giants across the board, from Amazon to Flipkart to Big Basket. By 2025, Quick Commerce revenues are expected to top $5.5 billion.
Zomato by the numbers:
- ₹128,000 crore ($15.4 billion) market cap as of June 2024
- ₹4,447 crore ($538 million) invested in Blinkit acquisition (2022)
- 5,000+ dark stores operated by Blinkit across India
Driving the news: meanwhile, recent quarterly performance from the company has offered further support to the investment case.
- Food delivery Gross Order Value (GOV) up 18% year-over-year to ₹7,500 crore ($905 million)
- Blinkit GOV grew 125% year-over-year to ₹3,200 crore ($386 million)
- Overall revenue increased by 85% to ₹2,850 crore ($344 million)
The market is responding positively to Zomato's quick commerce strategy, seeing it as a key driver of future growth. Analysts now project Blinkit to contribute 30-35% of Zomato's revenue by 2025.
Unrivaled infrastructure flywheel: Zomato is leveraging its existing infrastructure and delivery network to support Blinkit's operations. The two brands are sharing a delivery fleet of over 400,000 partners to optimize costs, with cross-selling opportunities among 70 million+ monthly active users.
- Zomato's integrated loyalty program "Zomato Gold" covers both food delivery and Blinkit.
Yes but challenges remain:
- Intense competition from rivals like Swiggy's Instamart (30% market share) and Zepto (15-20% share)
- Pressure to achieve profitability in the cash-intensive quick commerce segment
- While losses have narrowed, Blinkit is still not profitable at the EBITDA level
"Th"The quick commerce business has proven to be a natural extension for Zomato, allowing us to serve our customers more frequently and comprehensively. We're seeing consistent growth in Blinkit's user base and order frequency," says Deepinder Goyal, Zomato's CEO.
The bottom line: Zomato's stock performance reflects growing investor confidence in its quick commerce strategy. As the company continues to integrate and expand Blinkit, its success in this space could be a major factor in sustaining its market momentum. While the company has made significant strides towards profitability, achieving consistent profits across all segments remains a key focus for management and investors alike.
