Zomato, Swiggy's competitive intensity in qcom may inch up in medium term

Quite inevitably, India’s food delivery and quick commerce (qcom) markets are being compared to China’s as investors try to value these high-growth ecosystems.

 

India is a functional duopoly when it comes to food delivery though there are challengers to Eternal (Zomato) and Swiggy.

 

Qcom is a market with faster growth and the competition is even more intense. Players such as Flipkart and Amazon are looking at the space while Eternal and Swiggy remain the leaders.

 

China’s markets are far deeper. By some estimates, India’s food delivery market is only 5 per cent of China’s in size. However, the duopoly in India has meant better unit economics and higher market valuations.

 

The top Chinese food delivery player, Meituan, holds around 75 per cent market share there. It has earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of 3.9 per cent whereas Zomato’s margin is 4.6 per cent.

 

A key difference is that Indian food delivery players service only relatively high-income consumers.

 

The average order value (AOV) for India is around $5 for a per capita GDP of $2,500. The AOV for China is $7 for per capita of $14,000.

 

Adjusted for per capita, India is much higher. Hence, revenue and commission rates for India are high whereas the cost of service is much lower creating a structurally strong margin.  

 

Meituan has retained its leadership position in China only after a $30 billion price war as it was challenged by the likes of AliBaba.

 

China has also seen a convergence among qcom, e-commerce and food delivery and India may be headed in that direction.

 

On implication is that dislodging the two market leaders in India will require a huge cash burn.

 

Only a few organisations may have the deep pockets required to attempt this and those who have the resources may hesitate to get involved in a war of this nature, since this could be a margin-destroyer.

 

Swiggy is behind Eternal in food delivery with the latter enjoying around 150 basis points (bps) lead in terms of adjusted Ebitda margins.

 

The differential is partly due to scale and partly due to mix. Swiggy seems to be on track to eventually achieve its guided adjusted Ebitda margins of 5 per cent of GOV in food delivery.

 

However, the other goal of hitting 50 per cent market share in food delivery may be much harder to achieve.

 

In qcom, competition is intense but discounts are moderating while “minimum order values” are rising, which will improve unit economics.

 

The focus is on infrastructure and assortment-led competition rather than pure price. Capex requirements are changing for newer, larger and more diversified dark stores, and the rising complexity of supply chains would keep these provisioned.

 

Both Swiggy and Eternal have pointed out that capex per dark store has risen from around ~1 crore in FY25 to ~2.5 crore in FY27. 

 

Average capacity of dark stores will increase to over 5,000 sq ft from the earlier 3,000 sq ft. 

 

Stock-keeping unit (SKU) expansion creates a need for specialised stores as well. Warehouse needs also change as the supply chain becomes more complex.

 

That higher capex must result in more orders per store, and higher margins due to a better SKU mix, if the returns on invested capital (RoIC) are to be robust. 

 

The higher capex may also mean a margin squeeze in the near term.

 

But higher AOV and expanding SKU should result in better Ebitda margins in the long term. Blinkit recently guided for margins of 6 per cent of net order value (NOV) at the upper end against the previously guided range of 5-6 per cent.

 

The daily active user (DAU) to monthly active user (MAU) ratios are improving for both Blinkit and Instamart.

 

There has been a very modest increase in discounts from Amazon, BigBasket and Instamart in August 2026, with most platforms discounting in the 18-22 per cent range.

 

But Flipkart Minutes and Amazon Now are committed to qcom, with both targeting store expansions and leveraging their e-commerce customer base and category knowledge to differentiate. Both players have the resources to try and disrupt the business in their favour.

 

But competitive intensity will rise gradually in the medium term which gives Eternal and Swiggy more time to embed themselves.

 

On qcom, NOV estimates for Eternal and Swiggy are up by around 5-10 per cent per annum for the next 3-4 years.

 

And, Eternal should see Ebitda rising by mid- to high- single digits.

 

Swiggy’s margins will be low or negative in qcom for two years as it chases growth.