Zomato draws its grocery delivery biz off the menu

Food delivery monster Zomato Ltd has deserted designs to broaden into delivering food for the second time in two years, refering to infrastructure gaps in an exceptionally competitive online grocery market.

In a letter to its grocery partners on Friday, Zomato said, “Over the last two months of operations, we have had a few important realizations. Store catalogues are very dynamic, and inventory levels change frequently. This has led to gaps in order fulfillment, leading to poor customer experience.”

“In the same period, the express delivery model with under 15-minute delivery promise and near-perfect fulfillment rates has been getting a lot of traction with customers and expanding rapidly. We have realized that it is extremely difficult to pull off such a model with high fulfillment rates consistently in a marketplace model (like ours),” Zomato said in the letter, a copy of which has been reviewed by Mint.

Zomato previously fiddled with the e-grocery category in April last year in a bid to take advantage of a surge in demand for e-groceries during the first wave of the pandemic. It as of late reported designs to restart grocery offerings on its application and started pilots in Delhi-NCR in August.

“We have decided to shut our grocery pilot and, as of now, have no plans to run any other form of grocery delivery,” a spokesperson for Zomato said on Sunday in response to emailed queries from Mint.

“Grofers has found high-quality product-market fit in 10-minute grocery, and we believe our investment in the company will generate better outcomes for our shareholders than our in-house grocery effort,” the spokesperson said.

Zomato recently invested $100 million in e-grocery unicorn Grofers and its wholesale unit Hands-on Trades Pvt. Ltd, which likewise turned to the under the 10-minute-delivery model. Zomato holds 9.3% each in Grofers and Hands-on Trade.

Zomato will keep on working its business-to-business (B2B) fundamentals and grocery delivery services for restaurants through its Hyper pure vertical, the representative added.

Zomato’s change in methodology comes when its arch-rival Swiggy is inclining up its grocery and fundamentals service, Instamart, in Delhi-NCR as well as in Mumbai, Hyderabad, and Chennai. Instamart, which began in August 2020, likewise has a solid presence in Swiggy’s home market of Bengaluru.

Instamart keeps on making ‘dark stores’ or those which take just online orders with partners to have more control over their grocery inventory, as it starts 15-to 30-minute deliveries on the platform.

While declaring its maiden quarterly results as a listed firm, Zomato said misfortunes for its Hyper pure business extended in the June quarter because of investments made in developing the business.