Please assign a menu to the primary menu location under menu

News

zomato: Zomato to start Blinkit integration after deal approval


Top executives said in a conference call on Saturday that food delivery application plans to start integrating Blinkit on multiple fronts after approval of the proposed acquisition.

The company said the markdown in Blinkit’s valuation was due to macroeconomic factors.

Zomato’s board
approved its acquisition of quick commerce startup Blinkit (formerly Grofers) for Rs 4,447 crore ($570 million) in an all-stock deal on Friday.

During the analyst and shareholder call on Saturday, Zomato’s executives indicated that once the transaction closes, the priorities would be customers and delivery fleet integration. Zomato may consider moving Blinkit to the Zomato app.

“We will experiment with different ways of integrating the two customer bases or rather making sure that we are able to leverage Zomato’s customer base for the growth of Blinkit business,” said Zomato CFO Akshant Goyal. “Once the transaction is done, we’ll test these things and if it makes sense to actually have both the brands on the same app, then why not? So there are multiple ideas in our head and we’ll experiment and see what works eventually.”

Using Zomato’s food delivery customer base to cross-sell quick commerce is going to be a large part of “synergy realisation,” he said.

Discover the stories of your interest



“Post the deal closure, we are going to start experimenting with various ideas that we have and see which all bear fruit, including having the Blinkit tab on the Zomato app. As they say, experiment a lot and keep what works. This remains our guiding motto, Deepinder Goyal, Zomato founder, wrote in a letter to shareholders on Friday.

Markdown

Blinkit
turned into a unicorn last year following a $120 million funding round from Zomato and Tiger Global, valuing it at $1 billion. Zomato had
also invested $100 million in Blinkit when it was operating as Grofers before the food delivery company was listed on Indian exchanges last year.

“If you compare the size of the business (Blinkit) today, it is pretty similar to the size of the business last year, although the format was different then and the growth prospects one can argue were different,” said Zomato CFO Akshant Goyal. “The discount you’re seeing is essentially in our mind adjusting for the new reality that we all live in today, where the valuations have corrected for all growth businesses.”

The transaction is subject to the customary approvals, including that of 75% of shareholders who vote on the decision. The transaction is expected to close by early August, Zomato had told the BSE after its board meeting on Friday.

Ad revenue

Zomato expects both the target group and ad revenue potential of Blinkit to be greater than that of its food delivery business. While there is overlap in the target groups of Zomato and Blinkit, older users who are not yet using the food delivery service are using Blinkit, CFO Goyal said.

“I think there will be a large overlap between the user base, but there will be a new demographic or new user base that will be a customer or a user of quick commerce, which may not be the case with food delivery,” he said.

In his letter, CEO Goyal had said he would argue that ad sales revenue in quick commerce would be higher than food delivery “given the much larger digital ad spend budgets of consumer packaged goods and brands.”

Blinkit CEO Albinder Dhindsa said on the call that the overall grocery segment, including fresh, was 70% of overall sales. The company has improved its ‘take’ rates from 7.5% in January to 14.5.% in May 2022. The take rate is the commission charged by a marketplace for a transaction on its platform.

“We have had an increase in the commissions that we’re able to charge because some areas started thresholds beyond which the volume allowed us to be able to do that,” Dhindsa said.

“We also did see an uptick in advertising revenue as well as customer-paid delivery charges as well. All of these three other factors contributed to the increase in metric value.”

The company has retained 60% of consumers from the value-focused segment of its earlier model.

“Most of the user drops that we have over there are from areas where we became unserviceable once we limited our service to 10-minute delivery,” he said.

Having expanded to more than 450 dark stores dedicated to fulfilling orders, it’s since cut these down to 400 due to limited traction and other issues. Of this, 200 are operating in partnership with local sellers. It plans to focus on the 15 cities it’s in for now and improve the business of these dark stores. Blinkit’s gross order value (GOV) is already around 63% of Zomato’s food delivery GOV in Gurugram, the company said.

The Blinkit purchase is expected to help Zomato, which has been bullish on quick commerce, strengthen its position significantly in the buzzy and ultra-fast grocery delivery space. Rival Swiggy has
allocated at least $700 million for its quick commerce business under Instamart. At the same time, the sector has also seen other well-funded startups like Zepto,

Retail-backed Dunzo, and Tata-owned BigBasket.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.