How Swiggy plans to spread its wings

The first step in Swiggy’s local commerce idea is to tie up with supermarket chains, pharmacies, meat shops, pet stores, flower vendors and others.
This is Swiggy’s evolution from being a food-delivery company to a “deliver anything” unicorn.

Bengaluru-based food tech company Swiggy is preparing to launch its local commerce services on December 15, three people with knowledge of the firm’s activities have told Business Standard.

The first step in Swiggy’s local commerce idea is to tie up with supermarket chains, pharmacies, meat shops, pet stores, flower vendors and others.

Tentatively, the vendors will be asked to give Swiggy a commission of 2-3 per cent for increasing sales.

Apart from that, Swiggy will be slapping a delivery fee on every order.

There may be some cash backs and discounts in the beginning to attract customers but the company plans to phase them out.

This will be step one for Swiggy before it unveils its concierge service, which is internally called Dash and the name is bound to change once the service is announced.

Currently, even though Swiggy draws the largest number of orders for a food tech company, there is a lull between meal times.

And it says it can use the lull to make other deliveries.

Swiggy has been experimenting with batching, which is delivering multiple orders at the same time, and will use that to optimise its fleet.

But this is not just about optimising its fleet. This is Swiggy’s evolution from being a food-delivery company to a “deliver anything” unicorn.

Local commerce is an add-on to its strength of delivering food from restaurants. It also creates more use cases.

And with food being delivered consistently at an average ticket price of Rs 300 with many users ordering almost five times a week, Swiggy has seen a reason to grow larger than the current pigeonhole of food delivery.

A detailed questionnaire was sent to Swiggy, but there was no response.

Swiggy’s vision, according to people in the know, is to be part of the local commerce ecosystem and is using the lowest-hanging fruit, which is grocery and pharmacy.

The 2-3 per cent Swiggy charges initially will not be enough to break even on orders but it is planning to increase it as business picks up.

Swiggy had done the same thing in food delivery and now it charges almost 15 per cent of every order from its high-usage restaurants.

Immediate disruption will be caused to its closest competitor in the sector: Dunzo. This Google-backed concierge service recently expanded its footprint to Gurugram, Pune, Chennai and Hyderabad, among other cities.

“Dunzo has managed to acquire customers and ease people into a service, which is completely new for many Indians,” says a Dunzo executive.

Swiggy will get to use the groundwork Dunzo has laid for it. But unlike Dunzo, which utilises its fleet during the lull to transport customers, Swiggy will fall back on food.

When Swiggy unveils this service, its first casualty will not be Dunzo but the pharmacy delivery start-ups such as 1MG and grocery top-up firms such as Gurugram-based MilkBasket, which rely on local stores, supermarkets and wholesale outlets.

MilkBasket, however, operates in different time slots and is a mix of planned and top-up orders. It may stay untouched in the short term.

Dunzo, which has been taking market share away from BigBasket’s 2-hour delivery arm, BB Express, will see some part of its business slip away even further.

And that’s one of the reasons Swiggy plans to go to Gurugram.

Not only have the customers taken to these services faster in Gurgram compared to other cities, “the learnings from Gurugram are easily translated to other cities. It doesn’t always hold true for Bengaluru,” said a Swiggy executive.

Apart from the learning, Swiggy finds it easier to upend its delivery executive incentive programme.

Earlier, the delivery executive just had to pick up and drop, now she or he will be asked to make decisions: “When to call the customer, when to call the company and when to make decisions independently,” said the Dunzo executive.

Now, delivery executives will be paid according to the speed of decisions made.

This is all very similar to one of Swiggy’s biggest investors, Chinese technology company Meituan Dianping, which takes this concept a step further and lists stores from where customers buy things as small as pens and as big as TVs.

It is Swiggy’s ultimate aim to replicate that in India. For now, it all starts with Gurugram.

Photograph: Kind courtesy, Amlan Mishra/Swiggy via Twitter