Working hard and enhancing the efficiency

To be fair, Swiggy isn’t coming into this fight unarmed. It is already in the market for its third funding round since the start of 2018, having already raised Rs 2,170 crore ($310 million) across two funding rounds. Its last round, which saw the company raise $210 million and enter the unicorn club of startups valued over $1 billion, was in late June.

But that’s not its biggest weapon. Its 55,000-strong delivery fleet is. This fleet has almost doubled in size since the start of the year. However, according to a Swiggy employee, who spoke on condition of anonymity, the company understands that it will have to further scale its existing delivery fleet to be able to seamlessly integrate grocery, medicine and alcohol delivery into its existing operations.

First cash-based assignment

To this end, Swiggy made its first cash-based acquisition last month by buying out Mumbai-based Scootsy, which follows an on-demand concierge model. But while scaling is an unavoidable reality, a large part of Swiggy’s decision to deliver general consumables is to better utilize its existing fleet.

Swiggy considers its logistics operations its biggest strength, but it realizes that things could be better. At present, Swiggy claims, it handles around 14 million orders a month, with delivery personnel managing 9-10 deliveries a day. Analysts and industry experts feel they could do more. The incremental revenue from this would be huge for Swiggy, as just one extra delivery per day per rider would amount to an extra 1.5 million orders a month.

Swiggy’s consumables delivery play will go a long way towards this. While Swiggy’s peak hours are around lunch and dinner time, the general consumables delivery service would see riders called into service at hours when they would usually be idle. Products such as milk, for example, which are widely consumed and in high demand, could possibly drive a lot of orders in the morning hours.

But it goes beyond just this. Swiggy isn’t just looking to make better use of its existing resources. Indeed, apart from allowing Swiggy to make better use of its current strengths, Swiggy is hoping to reach out to new customers through groceries and alcohol.

Replacing the milkman

Swiggy has looked long and hard at the grocery segment and zeroed in on milk as a particularly important product when it comes to gaining customers. Swiggy figures that with India accounting for 26% of the world’s milk consumption, there are few better ways to enter Indian homes.

To become a part of India’s milk habit, Swiggy is currently holding talks with several milk delivery and dairy startups, according to two startups who are in direct discussions with Swiggy. Both startups requested anonymity as talks are still at an early stage.

Milk as a hook to bring in new users is a strategy followed by several micro-delivery startups such as Milkbasket and SuprDaily. Incidentally, Mumbai-based SuprDaily is reportedly in talks with Swiggy for an acquisition deal. The startup does home delivery of milk brands such as Amul, Gokul, Mother Dairy, and also parallelly sells bread, eggs, curd, paneer, coconut water, and other grocery consumables through its app.

Fetching low margin?

However, a person aware of Swiggy’s operations says that milk delivery fetches low margins. In the short run, at least, Swiggy is unlikely to mind this. Milk is not the be-all and end-all. Merely a wedge.

Similarly, Swiggy sees alcohol delivery as another hook for customer acquisition. Dunzo, the Bengaluru-based on-demand delivery startup, has seen this at play in their own business. “We actually don’t make any money from it (alcohol delivery). We don’t even have any tie-ups with outlets for it.

The alcohol business is not our primary business. We are in this because of the nature of our business—pick-up and drop,” says Dunzo co-founder and CEO Kabir Biswas. Despite Dunzo not doing anything to push alcohol delivery, it currently forms about 7-8% of Dunzo’s funnel, according to Biswas, indicating significant appeal to customers.