Publicly listed foodtech major Zomato has announced that it is unceremoniously exiting the grocery delivery business. This is the second time in two years that the Gurgaon-based company will be scrapping its grocery delivery biz as it failed to surmount any viable challenge to the incumbents. Zomato has officially cited the ‘inability to scale the business’ as the main reason in an email that has been accessed by several media outlets.
Zomato’s decision has come barely days after its investment portfolio company Grofers announced the express delivery service that promises to deliver groceries in flat 10 minutes. In fact, the foodtech unicorn has openly stated in its official email that it will banging on Grofers for cracking the grocery delivery business. Notably. Zomato had acquired 10% stake in Grofers in June this year.
Zomato had entered the grocery business in aftermath of COVID infused nationwide lockdown announced last year. But the company decided to retreat from the business after barely few months only to make a re-entry again earlier this year amid increasing competition in the space.
The company’s brief tryst with grocery delivery was always in pilot testing mode and hence it presumably never made a huge investment in this space. It is now safe to conclude that the Gurgaon based headquartered firm is making a final exit from the grocery business. However, it is tad difficult not to notice divergent routes that both Zomato and Swiggy are currently navigating. The latter has made no secrets about the fact that its non-food delivery unit Swiggy Genie will be core part of its strategy going forward.
The Bengaluru based company expects Swiggy Genie to become a prominent contributor to its topline in the coming years. That said, the grocery delivery biz is a tough nut crack especially considering that the profit margins are really thin.