Zepto’s market share grows to 28% as it eats into Swiggy’s Instamart

As competition among the quick commerce players intensifies, Y-combinator-backed Zepto saw its market share rise 28% as of January this year from 24% last year. This was mainly because of market share gains from rival Swiggy’s Instamart and also from the growth of the category as a whole, HSBC analysts said in a report.

Instamart’s market share has slipped to 32% as of January this year, from 36% last year and 52% in 2022.

To be sure, both Instamart and current market-leader Blinkit operate in 25-30 cities across India, while Zepto is only present in 10 metro cities.

Meanwhile, its sales have crossed Rs 2,000 crore in FY23. However, concerns around its burgeoning losses remain. In FY23, it had posted losses of Rs 1,272 crore.

In the report, HSBC analysts Yogesh Aggarwal and Prateek Maheshwari note that both Zepto and Blinkit are seeing strong improvement in profitability every quarter. In the next three to four years, Zepto expects to improve its contribution margin or store-level Ebitda to high-single digits. For Blinkit, the analysts expect overall Ebitda to be 4-5% by FY27.

“Zepto is already doing nearly 1,600 orders per day per store and hence, further margin expansion is not driven by operating leverage but other levers such as higher advertising revenues, better take-rates (sourcing leverage and better mix), reduction in last mile delivery cost (due to non-ICE vehicles and store densification) and higher delivery charges,” they said.

Overall, the brokerage believes that India will likely adapt to quick commerce directly from unorganised retail or kirana stores, while modern retail penetration will remain low. This is driven by the fact that quick commerce imitates most attributes of unorganised retail in India, unlike modern retail.

“For instance, the majority of the grocery spend by Indian consumers is through small tickets, high frequency purchases, which are suitable for QC (quick commerce) format rather than MR (modern retail). Plus, most Indian kitchens don’t have the space to store monthly groceries, unlike in developed markets,” the analysts noted.