Not every urban customer has ordered from us yet, and very few are ordering more than 20 meals a month from us. There is enough and more to be done in the food delivery marketplace
By Devika Singh
Swiggy recently forayed into the grocery delivery business, which is known to come with its share of operational hurdles. It has also been taking its food delivery app to newer geographies. Vivek Sunder talks to Devika Singh about the new verticals, the problem of margins, competition from biggies like Amazon and Flipkart, and more. Edited excerpts:
Your losses almost doubled in FY18, compared to FY17. And yet, you are expanding to newer geographies…
A lot of these cities are not necessarily more unprofitable than the major cities. In smaller cities, the traffic is not bad so it doesn’t take much time to commute. Also, the salary expectations of our sales force and delivery force are lower. Some of these cities are satellite towns of the nearby larger city. So, for example, we could easily run Hosur as a satellite of Bengaluru. There are no city overhead costs. Hence, the geographic expansion is not necessarily making our losses worse.
The challenge is that we don’t have a team in every city. Then, there are problems related to bandwidth speed, and in some places there is a greater need for a vernacular version of the app, especially for delivery executives. Our problems may become bigger when we move to the next set of cities; so far, we have only gone to places with a large population of early internet adopters.
You are venturing into grocery delivery with Swiggy Stores, and have also acquired milk delivery platform Supr Daily. What’s your strategy to tackle the thin margins and last mile delivery challenges?
We piloted Stores in Gurugram under our thesis that urban consumers face inconveniences and, therefore, we must remove their friction point by leveraging what we know best — delivery. We are in the middle of expanding Stores. In the coming quarter, we are considering three to four metros where Swiggy already has a user base. The milk business is still in the pilot stage.
Some categories will have lesser margins than the others in every marketplace. Since we are still in the pilot stage, it is not worth worrying about. We will deal with it. We have a plan in place to improve the margins, while dealing with the cost of delivery and operations.
Isn’t your core business getting diluted with the introduction of these verticals?
There is a very small set of people that is working on some of these other areas. I don’t think it is a distraction. The vast majority of our organisation’s focus is on the food delivery marketplace. Not every urban customer has ordered from us yet, and very few are ordering more than 20 meals a month from us. There is enough and more to be done in the food delivery marketplace.
Amazon and Flipkart are ramping up their grocery delivery services; Amazon is also reportedly entering the food delivery business. Does that bother you?
If Amazon were to enter using technology or a skill or a capability that is better than ours, we will be forced to up our game to compete with them. We don’t know what that specific skill is today. Amazon entered the food delivery space in the US and shuttered. However, we understand that just because Amazon failed there, does not mean it will fail here, too. There is competition, but we don’t obsess over it.
There are reports that you are slated to raise more funds. What are the areas you will focus on post that?
With any fundraising, there is a lot of uncertainty as things move very fast. If we raise funds, the money will go in all the areas of expansion — new geographies, new verticals and also new technology, including machine learning, AI, etc.
How do you decide on the markets to expand in?
We have created a system through which we research about 20 cities, and then simultaneously launch in all of them in a month. We are in the middle of executing this plan; by the end of this month, we will be in over 300 cities. We found that there was a big appeal for us in two segments: tourists and young professionals. We gauge if there is a sizeable population of these two cohorts, and if we are getting enough business in each of these cities to be viable.