Zepto is consuming more of Swiggy’s Instamart, increasing its market share to 28%

In January of this year, Zepto, financed by Y-combinator, experienced a 28% increase in its market share from 24% the previous year as the battle among the rapid commerce firms heats up. According to HSBC analysts, this was mainly caused by increases in market share from competitor Swiggy’s Instamart as well as the expansion of the category overall.

As of January of this year, Instamart’s market share was down to 32% from 36% in the previous year and 52% in 2022.

Indeed, Zepto is only available in ten major cities in India, while Instamart and the current market leader, Blinkit, are active in 25–30 cities nationwide.

Zepto has the second-highest market share of 32% when metros are the only ones taken into account, behind Blinkit’s 37%.

Zepto, which was founded in 2021 by Aadit Palicha and Kaivalya Vohra, has had a sharp increase in gross merchandise volume (GMV) during the last three years, and it now has a GMV run-rate of $1.2 billion, which is growing annually.

In the meantime, FY23 revenues have surpassed Rs 2,000 crore. Still, there are worries about its rapidly increasing losses. It reported losses of Rs 1,272 crore for FY23.

Yogesh Aggarwal and Prateek Maheshwari, analysts at HSBC, observe in the study that Zepto and Blinkit are both enjoying significant increases in profitability each quarter. Zepto anticipates increasing its contribution margin or store-level Ebitda to high single digits during the next three to four years. Analysts predict that by FY27, Blinkit’s total Ebitda will be between 4% and 5%.

According to them, “Zepto already processes almost 1,600 orders a day per store. As a result, additional leverage in the form of other levers—such as higher advertising revenues, better take-rates (sourced leverage and better mix), lower last-mile delivery costs (because of non-ICE vehicles and store densification), and higher delivery charges—will drive further margin expansion rather than operating leverage.

In general, the brokerage predicts that contemporary retail penetration will stay low in India and that the country would likely adjust to rapid commerce straight from kirana or unorganised retail establishments. This is caused by the fact that, in contrast to contemporary retail, rapid commerce mimics the majority of characteristics of unorganized retail in India.

For example, much of the food money spent by Indian customers comes from frequent, small-ticket purchases that fit better into the QC (quick commerce) model than the MR (modern retail) model. Furthermore, unlike in Western economies, most Indian kitchens lack the space needed to keep monthly goods, according to the researchers.