Swiggy’s Strategy in India’s Food Delivery Market

As Swiggy’s founder and group CEO Sriharsha Majety prepares for the evolving landscape of India’s food delivery market, he emphasises that the company remains extremely agile and vigilant. This strategic approach ensures Swiggy’s readiness to seize opportunities as they arise.

Market Challenges and Opportunities

Speaking at an investor event hosted by Prosus in London, Majety acknowledged the difficulties of breaking into this competitive segment, regardless of the resources available to new entrants. “In 2015, there were numerous players in food delivery. By 2017, major companies like Uber and Ola entered the market, and subsequently, Amazon joined in 2019. In 2021, ONDC made its debut,” he stated. “It’s commendable for both us and Zomato that we have successfully navigated these challenges. Delivering exceptional consumer service is not an easy feat.”

Majety’s comments followed a query regarding whether Rapido’s entry could potentially disrupt the existing food delivery ecosystem. He highlighted that even though Swiggy holds about 15% of Rapido and shares a common investor in Prosus, each company is set to pursue its own path.

Future Growth and Innovative Approaches

“It will be fascinating to observe if there is an alternative approach to food delivery that could expand this category, as we also anticipate further growth,” Majety continued. “Should we identify a new opportunity, we will immediately act on it instead of waiting.”

Rapido, primarily known for its two-wheeler taxi services, has reportedly established its commission structure with restaurant partners. As per an ET report dated June 9, the platform intends to charge restaurants Rs 25 for orders below Rs 400 and Rs 50 for those above. This brings their commission rates to 8-15%, which is more competitive compared to the 16-30% typically implemented by Swiggy and Zomato.

“If there’s an opening, we will act swiftly,” Majety commented. “We will explore our own opportunities with customers to enhance the category.”

Insights on the Quick Commerce Sector

Majety also provided insights on the rapidly shifting quick commerce sector, projecting its potential to reach a market size of $30-40 billion in the coming three to five years. However, he suggested that such a market may only be able to accommodate two significant players instead of five or six.

“At this stage, the quick commerce space is on track to reach $30-40 billion within three to five years. While this could sustain more than two players, it is improbable that it could host five or six,” he noted.

Currently, companies such as Blinkit, Zepto, and Swiggy’s own Instamart dominate this market, capturing around 85-90% of the market share. According to a BofA Global Research report, this represents a slight decrease from the previous 90-95%. The remaining share is distributed among Tata Digital’s BigBasket, Flipkart Minutes, Amazon Now, and Reliance Retail’s JioMart.

Market Consolidation Expectations

“We should anticipate some degree of consolidation,” Majety added. “The market features three leading players and several fringe operators. While consolidation is likely, there may also be instances where legacy ecommerce players opt to maintain their offerings to stay relevant.”