Zomato Announces Plans to Launch Online Grocery Delivery Service on Its App Soon, Again

Zomato is planning to launch an online grocery delivery service on its app soon, the company revealed in a press briefing on Thursday. The new attempt by the Gurugram-based restaurant aggregator will be its second after it shut down its initial grocery delivery model that was introduced during the national lockdown last year. Zomato made the fresh announcement to venture into online grocery delivery just ahead of the launch of its initial public offering (IPO) that is scheduled to go live on July 14. Zomato is aiming to raise Rs. 9,375 crores through a fresh issue of its equity shares that will be priced between Rs. 72 and Rs. 76 apiece.

During a virtual conference call, Zomato said that it was planning to launch its grocery delivery service “from an experimental point of view.” The service will be available directly through the Zomato app.

Zomato initially stepped into the grocery delivery market in April last year by kicking off its service in over 80 cities shortly after the government introduced the national lockdown. However, that service was shut down just months after its launch.

“Last year, when we did grocery, it was a need of the hour for our customers,” said Zomato co-founder Gaurav Gupta. “People were not using food delivery and needed grocery in their home to be able to cook all the food at home. And we, because of our network, enabled that quickly to serve our customers… Now, we'll be coming back to see, as an attempt of experimenting to see how we can build this hyper local part of the business.”

It is currently unclear whether Zomato will partner with local kirana retailers to offer grocery deliveries through its platform or go for virtual convenience stores (also known as dark stores). The latter is a model that Swiggy embraced for its native hyperlocal grocery delivery platform called Instamart.

Earlier this month, Zomato sought to acquire a minority stake of about 10 percent in online grocery delivery platform Grofers. It also announced a $100 million (roughly Rs. 747 crores) stake in Grofers during the conference call. Zomato CFO Akshant Goyal, however, clarified that the investment in Grofers was separate from the plans to launch its native grocery delivery service.

Zomato's comeback into grocery deliveries could give a tough fight to arch-rival Swiggy as it has been offering grocery deliveries through Instamart since August. However, companies including Amazon and Flipkart are also working hard on bolstering their grocery delivery models to expand their e-commerce footprint in the country.

At the same time, Grofers and Tata Group-backed BigBasket are trying to scale their businesses to stay strong in the competition. BigBasket also recently received an investment of Rs. 9,500 crores from Tata Digital.

In addition to existing players, Reliance Industries is establishing its JioMart as the next big contender in the market of online grocery deliveries in the country. The conglomerate already has backing of tech giants including Google and Facebook to take on the competition.

Grocery deliveries have attracted major companies as the COVID-19 pandemic forced Indian consumers to start looking for online alternatives of their nearby offline stores. A report by consulting firm RedSeer estimated that the overall online grocery market in India is expected to have a gross merchandise value (GMV) of $24 billion (roughly Rs. 1,79,400 crores) by 2025. The share of food and grocery in the Indian e-commerce retail market reached seven percent last year.