The next hyper-growth phase in the quick commerce space will come from pricing and assortment and Swiggy plans to focus on the latter, said the firm’s co-founder and CEO Sriharsha Majety. He said the companies will be differentiated beyond the delivery timelines in the quick delivery segment. “A lot of the questions came out of curiosity about quick commerce because it’s not a set thing yet. I think it’s going through hyper growth and there are multiple players,” he said.
Customer experience will drive the growth of quick commerce platforms, he added.
Quick commerce push
Swiggy’s initial public offering (IPO) will open on 6 November. It will allocate ₹1,179 crore from its IPO proceeds towards Instamart, according to its red herring prospectus.
“While we have increased our store count, we have also densified our store network. So our speed of delivery has reduced from 17 minutes to 12.5 minutes in the last year, representing a substantial improvement in the overall customer experience on both selection as well as speed. Our average order value has gone up from ₹441 to ₹487 over the last 12 months,” said Rahul Bothra, chief financial officer of Swiggy.
He said in the wake of more consumers engaging with the platform, the non-grocery selection has been ramped up. “As the basket size goes up, our throughput per store has increased by 60 per cent in the latest reported quarter and the frequency remains strong at 3.6 times a month,” he added.
Bothra said that the contribution margin of quick commerce sector has improved from -23 per cent in FY23 to -3 per cent in Q1, with a significant reduction in operating costs.
Megastore model
The Bengaluru-based company has also piloted a ‘megastore’ model, to support a broader selection, including household goods, kitchen appliances, and stationery. The format, currently being piloted in select locations in Bengaluru, features larger dark stores each spanning 8,000 to 10,000 square feet, and expands the site’s SKU count to over 30,000.
“We’re experimenting with a format where we can increase the selection without hampering the customer experience,” Bothra said. “Think of it like a single megastore attached to a network of dark stores, where consumers within a two-km radius get access to both 10-minute and 20-minute options.”
Swiggy is targeting a valuation of $11.3-11.5 billion in the upcoming initial public offering (IPO). It plans to raise ₹11,300 crore with the issuance of new shares amounting to ₹4,499 crore, at a price band of ₹371-390.