A few years ago, getting groceries delivered meant waiting hours, sometimes even days. If you ran out of something small, like batteries for your remote, your only option was to rush to the nearest store. That was just how things worked.
The Rise of Quick Commerce
Then, quick commerce arrived and changed everything. The concept was simple—deliver anything from groceries to snacks in less than 10 to 15 minutes. Today, platforms like Swiggy Instamart, Blinkit (Zomato’s quick commerce arm), and Zepto have transformed the delivery landscape. It’s no surprise that consumers now expect everything delivered fast and right to their doorstep. One company leading this space is Swiggy, which is gearing up for something big—a ₹50 billion IPO, with a total offer exceeding ₹116 billion.
Swiggy’s Pivot from Food Delivery to Quick Commerce
But why are we talking about Swiggy in the quick commerce space? Isn’t it mainly a food delivery company? Not anymore. Swiggy’s future is heavily tied to its quick commerce arm, Instamart, which already accounts for over 9% of its total revenue in just three years. While that may seem small, it’s Swiggy’s third-largest revenue stream, and the company is eager to expand it further.
The Importance of Market Share, CAC, and AOV
Quick commerce, however, is not just about speed. To truly win in this space, companies must focus on three crucial factors: market share, customer acquisition cost (CAC), and average order value (AOV).
Why These Factors Matter
Quick commerce operates on razor-thin margins and requires significant capital. Companies need to build an extensive logistics network, including dark stores—small, strategically placed warehouses that enable ultra-fast deliveries. They also have to keep attracting new customers while encouraging repeat orders. But if their CAC keeps rising and their AOV stays low, they’re in trouble. This is why managing cash flow efficiently is critical. Companies like Swiggy, Blinkit, and Zepto are all battling for dominance, but profitability depends on balancing growth with cost management.
Swiggy’s Journey to Quick Commerce Dominance
Swiggy didn’t always focus on quick commerce. When it launched in 2014, it dominated the food delivery space, going head-to-head with Zomato. But by 2022, Swiggy noticed that food delivery growth was slowing and margins were shrinking. So, Swiggy IPI pivoted toward quick commerce is likely to dominate the market.
Instamart’s Rapid Growth
That pivot has paid off in terms of scale. Instamart’s revenue doubled in FY24, reaching nearly ₹10.8 billion, far outpacing the 17% growth in Swiggy’s food delivery business. In terms of gross order value (GOV), Instamart surged by 58% in FY24, compared to just 15% for food delivery.
The Costs of Quick Commerce Success
But success in quick commerce isn’t cheap. Building a network of dark stores, managing logistics, and hefty marketing budgets drive up expenses. Swiggy’s CAC skyrocketed by 75% in FY24, and Instamart’s operating losses for the first quarter of FY25 accounted for 90% of Swiggy’s total EBITDA losses.
Swiggy IPO and Future Strategy
As Swiggy prepares for its Swiggy IPO, it plans to use the funds to expand its dark store network and optimize its delivery infrastructure. While the fresh equity will provide capital for future growth, potential investors will be watching to see how much of the funds will be directed toward expanding Instamart and ensuring its long-term profitability.
