It is not easy to be the best

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If Swiggy is part of the Flipkart family (in a manner of speaking), as its income and number of orders grow, Flipkart will benefit. “You have to remember, Flipkart’s biggest use case is electronics and phones. You can’t keep showing growth in that one vertical,” the investor adds. It means that Flipkart’s orders are high-value, but the low frequency. With Swiggy it gets low-value, high frequency, which helps it get a bigger share of the wallet.

Efforts made by the Flipkart

“Flipkart has kapda (clothes with Myntra), now roti (food with Swiggy), all it needs is makaan (house) and it will complete the three basic necessities in one app,” he says.

The utilization of fleet: What is the one pain point that bothers Swiggy the most? It is still to utilize its delivery personnel optimally. This means that during off-peak hours, it’s delivery agents don’t have too many deliveries to make. Despite all of Swiggy’s marketing tricks, which include offering free deliveries, customers don’t specifically want breakfast or the evening snack. But Swiggy has to pay its delivery personnel just to keep the app online so supply is maintained in case there is demand. That’s where Flipkart comes in.

The e-commerce major recently relaunched its grocery business in Bengaluru. Flipkart has realized a flaw in its process here. Ekart, Flipkart’s logistics arm, doesn’t have the nuance to deliver food products. For Flipkart, product delivery is either fragile or non-fragile. It has neither the technology nor the know-how of delivering food.

Flipkart is the master at batching (where one delivery agent completes more than one order on a single trip), but all this starts to come apart when food has to be delivered because certain types of products can stay outside refrigeration only for so long. Enter Swiggy. Flipkart could use Swiggy’s idle fleet during the afternoon and early in the morning. Just like Amazon and BigBasket. If the experiment works, all Flipkart has to do is unveil the grocery service in every city Swiggy is present in and start operations.

Expansion: Currently, Swiggy is present in eight cities. The company, however, plans to increase its footprint and start operations in Ahmedabad and Chandigarh. “According to our internal research, Ahmedabad as a market is bigger than Kolkata,” says a Swiggy employee who didn’t want to be identified as he is not allowed to talk to the press. The other seven cities see frequent orders, albeit at a low ticket size (Rs 250-280).

Impact of the ticket size

“Kolkata has low frequency but high ticket size (Rs 380-450). The city is still very much used to eating socially and not alone,” he explains. This is where Flipkart comes in. Swiggy plans to leverage Flipkart’s reach inside these newer markets. “There are nuances of a city Ekart has access to. It knows routes within cities only an e-commerce company will know,” says an entrepreneur who tried and burnt his fingers in food tech.

“One of Swiggy’s strengths is the heat maps of customers and restaurants. A part of that data can be obtained from Ekart,” adds the Swiggy employee. There is enough data with Flipkart, which can help Swiggy set up cloud kitchens and delivery hubs. It can start to find the intersection of Flipkart’s customers with its own, and then start to cross-sell, thus lowering the cost of acquiring customers.

Cloud kitchens: On Tuesday, Swiggy launched Swiggy Access in Bengaluru, which allows restaurants to start delivery kitchens in neighborhoods where they do not have a presence. Swiggy will provide the space and curate restaurant partners who are willing to work out of the shared space. It plans to expand to other cities and has shortlisted 40 restaurants for the service. The restaurants will work on a commission share basis with Swiggy which will also deliver the food for them.

Swiggy’s focus on building kitchen infrastructure will also help its biggest bet of the year—its own brand of food from The Bowl Company, House of Dabbas and Blaze Artisan Sandwiches#. The focus on making its own food helps Swiggy increase the margins by 45%, says a partner working with the company. Swiggy is treating its in-house food brands as a separate vertical, headed by InnerChef co-founder Rahul Samat who joined Swiggy in 2016. He is a part of the strategy and new initiatives team at the company.

 

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