Delivery dreams: Swiggy, Dunzo on aggressive expansion path in India

After the low-key launch of its local commerce pilot Swiggy Stores in Gurugram last month, Swiggy may be eyeing Pune as its next port of call. The food tech unicorn, which is expanding to a platform that delivers a wide range of products, has already started hiring for the purpose. It plans to launch the service in Pune in April. But sources say that if Swiggy manages to corner a share of the market in Gurugram, the company could skip Pune and launch in Bengaluru instead.

The timing is interesting as April is also when Google-backed Dunzo, Swiggy's competitor in the local commerce/concierge service business, plans to launch operations in Mumbai. But before it hits the country’s commercial capital, Dunzo is expected to set up shop in Jaipur by the end of March. The local commerce start-up currently operates in Bengaluru, Pune, Delhi-NCR, Hyderabad and Chennai.

“Dunzo’s move to Jaipur will be a test of whether or not it can find demand beyond the big cities,” says an official close to the company. In Jaipur, the company will first launch its logistics services along with a ride-sharing platform and will compete with Ola, which already runs a bike-sharing service there. If Dunzo manages to take off in Jaipur, it can cite that as proof of concept to raise another round of funding, with Google likely to lead the round.

E-mail queries on their new initiatives sent to both Dunzo and Swiggy did not elicit any response. 

Up until now, Dunzo has been an urban phenomenon, with the company having succeeded in scaling up in Bengaluru and Gurugram. In Bengaluru, Dunzo has eaten into grocery and foods delivery firm BigBasket’s market share in express deliveries. “This is primarily because Dunzo has managed to close the two-hour gap between the order and the delivery,” says a senior executive at a hyperlocal grocery company. In fact, Dunzo is now taking a bite out of BigBasket’s market share in Gurugram as well. 

Up until now, Dunzo has been an urban phenomenon

Observers say that the company’s move to Mumbai will be fraught with interest. “Mumbai is different from other geographies,” says a former Swiggy executive. High-value customers are distributed across the city and the distances are huge. Dunzo will have to start small and slowly learn its way up. As for Swiggy, if it launches in Pune next, it might face the same growing pains as Dunzo did when it rolled out operations in that city over a year ago. Pune is uniquely designed and divided into small neighbourhoods with a strong local delivery network run by individual stores. Since most of them deliver products at a nominal charge of Rs 10-20, this creates a redundancy for local commerce services like Swiggy and Dunzo. Both firms charge for deliveries if the customer demands the product immediately, and use batching (where one trip can cater to multiple orders) in the case of customers ready to wait a couple of hours. “The margin on most consumer goods is about 6 to 8 per cent from the retailers. If the rider can club more than two orders together, each order is in the black,” says the official close to Dunzo. Hence, the key lies in generating enough demand so that two or more orders can be completed on a single trip. Clearly, in a city as small as Pune, Swiggy and Dunzo competing for the same share of the market will make for an interesting fight.

“Swiggy won’t face the same problem in Gurugram, though," points out the senior executive at Swiggy. "That's because the city is huge and there is enough demand to sustain more than two players.” 

But growing pains or not, the local commerce space is all set to hot up in the coming months. It is learnt that Foodpanda and Uber Eats are both toying with the idea of launching concierge and grocery delivery services by the end of the year. And Swiggy too has plans to expand to all the metros by the end of 2019.

Treading on a new route

Dunzo

Expected launch: April

Cities: Jaipur, Mumbai

Recent performance: It has been an urban phenomenon, with the firm having succeeded in scaling up in Bengaluru and Gurugram

Challenges

• Observers say the move to Mumbai will be fraught with interest
• High-value customers are distributed across the city and the distances are huge. 
• It will have to start small and slowly learn its way up

Swiggy

Expected launch: April

City: Pune (might skip and launch in Bengaluru)

Recent performance: Launched local commerce pilot Swiggy Stores in Gurugram last month. Has already started hiring for next launches

Challenges

• If it launches in Pune, it might face the same growing pains as Dunzo did when it rolled out operations in Pune
• Pune is uniquely designed and divided into small neighbourhoods with a strong local delivery network run by individual stores 
• Since most of them deliver products at a nominal charge of Rs 10-20, this creates redundancy for Swiggy