Business
Ultra-quick commerce is entering a slow death
Ultra-quick commerce is entering a slow death
About this update from Eternal Limited
By Shritama Bose and Ujjaini Dutta The hottest corner of India's e-commerce market is running on fumes. Nexus Venture Partners-backed Zepto, the money-losing startup that delivers everything from onions to speakers in 10 minutes, is deferring plans to go public by a year as it struggles to cut costs, news website Moneycontrol reported last week. Rival offerings from Eternal NSE:ETERNAL, formerly Zomato, and Swiggy NSE:SWIGGY are bleeding cash too. The sensible - and likely - next move for all three would be to stop offering ultra-quick deliveries at all.The combination of densely populated cities like Mumbai and New Delhi plus abundant cheap labour made it look possible that India could pull off a delivery model that has failed elsewhere, and spawned an industry Bernstein estimates is worth $10 billion. As the top player in the space with a 43% share by monthly active users, Zepto looked like a winner. Its valuation nearly quadrupled to $5 billion in the 12 months to August 2024. Almost a year on, the euphoria looks hard to sustain. Adjusted EBITDA losses at Swiggy's Instamart and Eternal's Blinkit widened in the first three months of this year due to an aggressive expansion of so-called dark stores that also act as mini-warehouses. More spending is underway: HSBC expects Zepto to increase its dark stores by 18% to 1,000. Competition is intensifying too: Tata group-backed BigBasket is entering the 10-minute food delivery space, going up against Blinkit's Bistro and Zepto's Cafe, Reuters reported on Tuesday.It's not clear if and when 10-minute deliveries can turn a sustainable profit. At least Swiggy and Eternal have other businesses to cushion the blow. But for Zepto, which will struggle to replicate its model beyond big cities, the pressure to stem its losses is mounting. Founders Aadit Palicha and Kaivalya Vohra are eyeing the high-yield loan market and say the company will be close to breaking even on EBITDA and operating cash flow in three months.Meanwhile, public market investors are pickier. Electric-scooter maker Ather Energy NSE:ATHERENERG and Brookfield-backed luxury hotel chain Schloss Bangalore (SCHL.NS) had weak trading debuts despite downsized offers. Investors' patience with unprofitable startups is running thin after Ola Electric Mobility's NSE:OLAELEC disastrous run since its August listing. Shares of Eternal and Swiggy are down by up to a...