Quick commerce is proving to be a solid business proposition. Companies like Zomato’s Blinkit and Y Combinator-backed Zepto have recently shown growth, charting clear paths to profitability.
Blinkit logged its highest gross order value (GOV) and customer transactions in June and July, showing a positive contribution for the first time in the quarter ended June 2023.
Deepinder Goyal, the company’s co-founder and CEO, predicted that Blinkit would deliver more value to shareholders than the core food delivery business in the next decade.
“Blinkit’s GOV is almost on par with Zomato’s GOV in major cities where we share a presence. This is just the start. I believe that in a decade, Blinkit will bring more value to our shareholders than Zomato,” he wrote in a shareholder letter.
Blinkit’s revenue rose to Rs 384 crore in Q1 FY24, from Rs 363 crore in the previous quarter. Its average order value (AOV) was Rs 582 in Q1, up 11 per cent from Rs 522 in the last quarter.
The firm improved performance despite operational disruptions from heavy rain and a heat wave, and a strike by its delivery workers in April – which caused a temporary closure of some of its dark stores in Delhi-NCR.
However, these disruptions did impact the business. Blinkit reported slower sequential GOV growth for the quarter at Rs 2,140 crore, compared to Rs 2,046 crore in Q4 FY23.
Still, the firm’s top brass expects over 60 per cent year-on-year growth in GOV, while continuing to enhance economics.
“We think the business is still in its infancy, with only around 4 million monthly transacting customers and a limited geographical footprint, especially given the size of the opportunity,” said Albinder Dhindsa, CEO, Blinkit.
Based on its current volumes, the company predicts a 20 per cent growth in GOV next quarter. It also expects the business to become Ebitda positive in the next four quarters.
“We are squarely focused on growing our business in terms of customer numbers and their monthly wallet share. If we do this successfully, profitability will be the result,” Dhindsa added.
The Blinkit story echoes that of its competitor, Zepto. Aadit Palicha, co-founder and CEO, Zepto, recently told Business Standard that he expects the company to become cashflow positive in the coming year.
The Mumbai-based startup aims to increase scale alongside profitability. “It’s not enough to simply maintain growth and then break even. Our focus has always been on achieving profitability while increasing scale,” he said.
Palicha’s firm is also on a similar growth path. Dark stores, contributing to over half of Zepto’s business, are profitable. The company has seen a 300 per cent year-on-year growth in sales this year. Additionally, he predicts the business will become cashflow positive in the next 12-15 months.
“At present, we operate over 200 dark stores in seven cities. Most of our growth is from deepening operations in existing locations. Even without geographical expansion, we’re seeing huge growth due to the size of the market opportunity,” Palicha said.
Similarly, Blinkit management predicts the company will become adjusted Ebitda positive over the next four quarters. The company, which currently runs 383 dark stores, plans to open nearly 100 new stores in FY24.
“Achieving sustainable positive contribution at the business level was the first step. However, several factors need to align to reach adjusted Ebitda break-even. Doing that along with the store expansion plan will be challenging, but the team is highly motivated to deliver growth and profitability in the coming months,” Dhindsa added.
The management team is also optimistic about achieving adjusted Ebitda break-even at a cumulative investment much lower than the $320 million – the target set in August 2022, when Blinkit was acquired.