Zomato Ltd, the food delivery giant, has now taken a decision to stop delivering groceries for the second time in these two years. This decision has been taken as in this highly competitive online grocery market, they have cited some infrastructure gaps.
Now as per the letter which was released by Zomato to its grocery partners on Friday, Zomato said that the grocery service was not so successful and also faced challenges like changes in the inventory and gaps in full settlement of orders which lead to a poor customer experience. Zomato stated, “over the last two months of operations we have had a few important realizations…. Store catalogs are very dynamic and inventory levels change frequently. This has led to gaps in order fulfillment, leading to poor customer experience.” And in addition to this Zomato added in the letter that, “in the same period the express delivery model with under 15 minute delivery from his and near-perfect fulfillment rates has been getting a lot of traction with customers and expanding rapidly. we have realized that it is extremely difficult to pull off such a model with high fulfillment rates consistently in a marketplace model like ours”. This letter by Zomato to their grocery partners was reviewed by Mint.
In April last year, Zomato dabbled with 13 grocery categories so that they can exploit a search in demand for e groceries during the first wave of coronavirus pandemic. and recently Zomato announced some plants so that they can restart the grocery of rings on its app and they also begin a pilot in Delhi NCR in August. And then Zomato began to start the pilot for a 45-minute grocery delivery service in a few markets as they started from Delhi NCR in August. Zomato allowed the users to order directly from the stores and operated on a marketplace model but this pilot will come to an end on September 17.
Zomato’s spokesperson also said that “we have decided to shut down our grocery pilot and, as of now, have no plans to run any other form of grocery delivery on a platform,” Zomato said in response to the queries which were emailed by Mint. Talking about Grofers and their investment in it Zomato’s spokesperson said, “grofers have found a high quality product market fit in 10-minute grocery and we believe our investment will generate better outcomes for our shareholders than our in-house grocery effort.”
$100 million was invested by Zomato recently in unicorn Grofers and also in its wholesale unit Hands On Trades Pvt. Ltd, which has also been awarded the under the 10-minute delivery model. Zomato holds 9.3 % in grofers and also in Hands On Trade. Through Hyperpure, Zomato will now continue to operate the business-to-business essentials and also the grocery delivery services for restaurants and this was stated by Zomato’s spokesperson.
Zomato made its re-entry in this grocery delivery space this year and even though it had a tough competition with Reliance industries Jio Mart and the Tata group’s Big basket and Swiggy’s instamart also including hyperlocal delivery platforms like Google-back dunzo. Even though Zomato tried the grocery delivery services during the pandemic and was also in lockdown in 2020, it failed to scale and it was shut down.
This shift in Zomato strategy comes at a time when Zomato rival Swiggy is coming up with grocery and essential services through instamart in Delhi NCR and also considering all the key metros of Mumbai, Hyderabad, and Chennai. Instamart was actually started in August 2020 but in this small course of time, it had a large and a strong presence in Swiggy’s home market of Bengaluru.
