Food delivery unicorn Zomato has shut shop on its grocery delivery services. The company further announced that Grofers will be generating better results compared to its in-house attempts in grocery delivery services.
The foray into grocery delivery remained a short stint by Zomato as it only lasted a few months, having its beginnings in July this year. According to reports, Zomato has cited multiple reasons for pulling the plog on grocery delivery – delivery gaps, substandard customer experience, to name a few.
Grofers, BigBasket and Dunzo have been on the upper echelon in the food delivery startup rankings. While, these companies were doing just fine, having millions of dollars worth of funding in its piggy bank, the COVID-19 crisis changed it all.
The pandemic did to the grocery delivery services, what demonetization did to the digital payment services in India. Customers, who remained skeptical of having grocery delivered by online platforms were left with no choice but to rely on such services.
Zomato, the food delivery and restaurant aggregator unicorn too ventured into the grocery delivery space. However, the company’s recent announcement left everyone surprised.
The Facts of the Matter
On September 13, the company announced that it will be pulling its plug on the quick grocery delivery services from September 17. The company’s statement also stated that it has no plan to foray once again in the grocery delivery business, and that its investment in Grofers will be generating better outcome compared to its own pilot project.
“We have decided to shut down our grocery pilot and as of now, have no plans 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 in the company will generate better outcomes for our shareholders than our in-house grocery effort,” the company’s statement read.
“Gaps in order, Poor Customer Experience” – Zomato Lays Out Reasons
In its email to its grocery partners, the company noted that its quick delivery services were relatively a moderate success. However, the company stated that due to the dynamic nature of inventory levels that are ever changing, poor customer experience was witnessed.
“Store catalogues are very dynamic and inventory levels change frequently. This has led to gaps in order fulfillment, leading to poor customer experience,” the email read, as reported by Moneycontrol.
Further, the company noted, “We have realised that it is it extremely difficult to pull off such a delivery promise with high fulfillment rates consistently in a marketplace model (like ours),” the note read.
The Zomato – Grofers Connection
It should be noted that earlier last month Zomato had acquired about 9.16% of Grofers and had breathed a new life in the venture by pouring in Rs. 518.2 crores.
Further that Grofers – which also offers express delivery services – has been one of the largest grocery delivery platforms in India. Owing to the fact that its revenue increased to Rs. 176.79 crores in FY20, Zomato chose not to compete in the same business.
How COVID-19 Changed Express Delivery Business
As mentioned earlier, the crisis of the COVID-19 pandemic was used as an opportunity by the grocery delivery players. Since then, players like BigBasket, Grofers, Dunzo and even Swiggy have tried to cater to Indian masses.
Interestingly, they are also catering to a generation that’s spoilt on choice and instant gratification. Now, most of these platforms are promising express deliveries which are timed less than 15 minutes.
It’s clear that express-delivery services are going to continue on its onward trend. According to a Reedseer survey, India’s quick commerce sector is going to grow by 10-15 times and will present a $5 billion worth piece of revenue pie by 2025.