Zomato flags rising competition in quick-commerce: How will it impact Blinkit's quest for profitability?

Zomato Q4 Results: Zomato, now known as Eternal, on Thursday, May 1, posted a sharp decline of 78% year-on-year (YoY) in its January-March quarter of the financial year 2024-25 (FY25) to ₹39 crore, largely on account of the accelerated investments in its quick-commerce business Blinkit.

Moreover, the slowdown in the food delivery business also has a Blinkit connection. CEO Deepinder Goyal said that competition from quick delivery of packaged food from quick commerce is leading to a drop in demand for food delivery from restaurants.

Blinkit Q4 results

Blinkit's adjusted EBITDA losses, meanwhile, increased to ₹178 crore from ₹103 crore in the previous quarter, which Eternal said "was expected and in line with our plan to pull-forward expansion of our store network".

While the company added 294 net new stores in Q4FY25, making it its highest-ever net store addition in a single quarter, and saw average monthly transacting customers increasing to 13.7 million in Q4FY25 from 10.6 million in Q3FY25, it flagged rising competition in the quick commerce business.

Akshant Goyal, Chief Executive Officer, at Eternal said, “Our view is that competition is going to intensify further from here in the near term. This is the largest consumption category in the country, and beyond just the early quick commerce players, we will continue to see competition from next-day delivery companies as they invest more in faster deliveries, especially in non-grocery categories."

However, despite that, he said his long-term optimism for the business remains intact.

Mitigation Steps

Over the next few quarters, the company has a three-pronged strategy to deal with rising competition:

1. Improving customer experience with more consistent delivery and fulfilment experience
2. Increase the breadth of product categories that customers can reliably buy from Blinkit
3. Increase our footprint, both in terms of stores and our nationwide supply chain, to reach more customers efficiently

These steps might require the company to increase its cash burn, and delay the scope for profitability for Blinkit.

Will Blinkit profits have to wait?

Commenting on whether profitability is a near-term priority for Blinkit or not, Albinder Dhindsa, the founder and CEO, Blinkit, said that in the near term, the losses will increase or decrease depending on how the pace of expansion and competitive intensity play out over the next few quarters.

“Sustained profitability will be an outcome of focusing on the right long-term priorities. We have a large market opportunity to cover and we remain confident of the profit potential in this business in steady state (5-6% of NOV),” Dhindaa added.

However, Akshat Goyal emphasised that Blinkit will aggressively look to grow its market share, especially in the face of heightened competition, and will not let any “short-term profitability goals come in the way of that”.

According to a Citi report, Blinkit is leading the quick commerce segment at 41% stake, followed by Zepto. While Swiggy is in the third place, with a 23% market share.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.