Brokerage firm Jefferies quoted that investors are sceptical about Zomato’s entry into the quick commerce space, after the online food ordering platform acquired Blinkit earlier this year, though they are confident about its competitive advantage in the food delivery space.
Jefferies quoted in a note “Investors are generally convinced on the food delivery moat and the discussion was mainly around unit economics.”
According to the statement, Zomato co-founder and CEO Deepinder Goyal and CFO Akshant Goyal recently met with investors in the United States.
In addition to it “However, scepticism is high on quick commerce, given no proof of concept yet in any large market in the world.”
A number of investors voiced concern regarding Blinkit, asking, among other things, “why someone needs grocery delivery in 10 minutes?” as quoted in the memo. Even if things go well, competitors like Amazon, Flipkart, and Reliance Retail are a cause for worry.
However, Zomato is bullish on fast trading and sees Blinkit as an important driver of future growth and profitability, even surpassing food delivery in the long run. The company told investors that some of its dark stores are already at par with contributions and more will do so next year.
In July, the overall contribution loss was 10% of gross order value, with an adjusted Ebitda loss at Rs 900 crore, which is 19% of the gross order value.
As the business expanded into new areas, such as cosmetics, hygiene products, and medicines, it expected margins to rise.
Jefferies said that Zomato’s leadership thinks the rapid commerce business’ long-term margin may merge with food tech. The $150 million pre-acquisition loan to Blinkit is a part of the $320 million expected to be invested (and lost) in the next fiscal year.