Why Is Zomato In No Rush To Integrate Blinkit Into Its App?

Why Is Zomato In No Rush To Integrate Blinkit Into Its App?

In terms of delivery operations, Zomato recognizes the distinct nature of food delivery and quick commerce.

www.benzinga.comUpdated: Sunday, January 07, 2024, 01:05 PM IST
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Zomato, led by founder Deepinder Goyal, is adopting a unique approach to integrating its quick-commerce unit, Blinkit. Contrary to the trend of creating super apps, as seen in China, Zomato believes in fostering super brands, a philosophy reflected in its strategy of maintaining Blinkit as an independent entity.

What to know: When Zomato acquired the online grocery firm Blinkit for $570 million in 2022, industry observers were keen to see how it would be integrated into the parent food-delivery platform. Initially, there were expectations of a merger, especially of the delivery fleets, to enhance efficiency and profitability.

However, Zomato has now opted for a more nuanced integration. The plan primarily involves sourcing synergies with its B2B supplies vertical, Hyperpure, and providing a dedicated tab in the Zomato app to redirect users to Blinkit.

This approach contrasts sharply with Swiggy, Zomato’s chief rival, which has fully integrated its quick-commerce vertical, Instamart, into its main app, leveraging both its loyalty program and delivery fleet.

Why is Zomato approaching food delivery and quick commerce differently?

As per an ET report, Zomato’s strategy is driven by the desire to build distinct brands and ensure the customer experience isn’t compromised. Now while cost-reducing synergies are beneficial, analysts note that they should not add operational complexities. This viewpoint is critical when considering the integration of Zomato and Blinkit, focusing on operations, customer experience, and fixed-cost leveraging.

In terms of delivery operations, Zomato recognizes the distinct nature of food delivery and quick commerce. Blinkit’s ultra-hyperlocal model relies on riders familiar with specific localities, contrasting with Zomato’s broader food-delivery network. As a result, Zomato sees limited scope for integrating these two delivery models.

As of September 30, 2023, Zomato has over 4 lakh delivery partners in India. For customer synergies, the only integration so far is the Blinkit tab on the Zomato app. There are no current plans to include Blinkit in Zomato’s Gold loyalty program, in contrast to Swiggy’s strategy with Instamart and Swiggy One.

On the operational front, integrating Blinkit and Hyperpure at the sourcing end allows Zomato to leverage common costs, driving efficiencies. This integration has resulted in merged warehouses and reduced expenses in procurement, transportation, and human resources, aiding the group’s overall financial health.

Quick-commerce companies, in their quest for profitability, are increasingly focusing on leveraging fixed costs to maximize revenue. Mumbai-based Zepto and Swiggy’s Instacafe in Bengaluru are examples of this trend, seeking to improve margins and order sizes. Blinkit is also enhancing its order value by diversifying beyond groceries on its platform.

(The article is published under a mutual content partnership arrangement between The Free Press Journal and Benzinga.)

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