Generally, food business has high margins say about 30-50% for restaurants if they run successfully. Zomato/Swiggy unable to take their share in this business to be profitable.
They have found their advantage in the delivery network they established and pivoted to quick commerce to see if it works. The existing retail stores, DMart and others are unable to make more than 10% margins out of this business. How will quick commerce come out as a profitable business in this sector. If that has to happen, more than 10% of the population should be working as delivery boys struggling to meet their ends due to the high unemployment in India.
Even Amazon with its massive delivery network failed to become successful with Amazon Fresh. Do you think Amazon is able to make profits by selling only third party products on its platform? NO, they have created their own products with high margins to become profitable and sustainable.
Big Basket is operating in the grocery delivery segment for over a decade, they are able to sustain because of their own procurement products which are costly compared to the DMart prices. Hence it was never a competition threat to DMart which caters affordable segment.
So the quick commerce business cannot create their own products to compete with big FMCG companies and capture market share from retailers in a long run to become profitable and sustainable.
As Investors we should focus on understanding the business models more than the financials and ratios.
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