Business story: Can Swiggy sustain the brunt of time?

The online food delivery business made in-roads in India in the pre-Covid era. Swiggy and Zomoto took the lead with the rise of online food business platforms during the COVID-19 pandemic. Riding on the spectacular wave of digitalization, the two major delivery giants generated mammoth revenues. As lockdowns and social distancing measures were implemented, people were forced to find new ways to access their favourite meals and cuisines. Online food delivery and takeout platforms quickly filled this void, displaying adequate resilience and adaptability of humanity in the face of adversity.

Swiggy, thus provided a convenient and safe way for the people to continue enjoying their favourite foods while staying home. The upsurge in demand for online food services led to a proliferation of new platforms and a booming industry. However, as the pandemic subsided, many consumers began returning to their pre-pandemic habits of patronizing brick-and-mortar restaurants. The turn of fate led to the downturn in online food delivery industry. Nevertheless, the pandemic has permanently changed the way we think about food and the ways in which we access it. The online food delivery platforms will continue to play an important role in the food industry.

Swiggy amidst impending financial doom

Swiggy, which largely patronised online food delivery business in India, had registered a loss of Rs 3,628.9 crore during last financial year. Its expenses stood at 227 per cent of the previous year’s cost. The losses of the ‘decacorn’ widened 2.24 times, in spite of the fact that the revenue surged more than twofold to Rs 5,704.9 crore in FY22. While the company’s losses increased from a base of Rs 1,616.9 crore in FY21, its overall spending in FY22 reached Rs 9,748.7 crore, up from Rs 4,292.8 crore of the previous year.

Evidently, Swiggy has raised a significant sum as venture capital funding in recent years, but the company lacked strategic depth in planning. Various experts claim that Swiggy may have failed to develop a clear and comprehensive strategic plan for how to use venture capital funding to achieve long-term goals. The prominent issue with the company had been overspending. The overall spending of Rs 9,748.7 crore depicts that Swiggy may have overspent on advertising and other short-term growth tactics, rather than investing in long-term initiatives such as research and development or expanding into new markets.

Furthermore, the company seems to have fallen on the face owing to lack of diversification. Swiggy is heavily dependent on the food delivery business in India, and it certainly failed to diversify the revenue streams and explore new business opportunities. Consequently, the company became more vulnerable to market fluctuations and competition with Blinkit, on the quick e-commerce platform.

The $10 billion worth decacorn reported, “Instamart (currently live in 27 Cities), which allows customers to order groceries and essentials throughout the day in 10-30 minutes with a spread of over 5000 SKUs (stock keeping units) and 500+ leading FMCG and D2C brands, continues to grow within existing cities and expand into newer cities. High availability and very low cancellations/ complaints, while driving economic efficiency to our bottom line, remain at the core of our operations.”

Also read: Reliance and WhatsApp together means curtains for Blinkit, Zepto, Dunzo and Swiggy Instamart

Market Competition out performs Swiggy

Essentially, it can be said that Swiggy may have underestimated the competition in the Indian food delivery market, especially from the well-established players like Zomato and UberEats. The company’s failure to anticipate and respond to competitive threats is evident from the fact that Swiggy increased its spending on advertising and promotion by 300% in FY22 from Rs 461 crore in FY21 to Rs 1,848.7 crore.

Despite that, it could not scale up the operations and infrastructure effectively to keep up with the needs of the changing time. The outsourcing cost of the company too, surged to Rs 2,249.7 crore in FY22, against Rs 985.1 crore a year ago. Consequently, the losses widened by 2.24 times from the base of Rs 1,616.9 crore in FY21.

The factual matrix depicts that the food delivery giant is amidst a ‘nervous phase’ whereby the company has been overburdened by skyrocketing expenditure and outsourcing costs. The business model of the company can be said to be too reliant on the ‘Third-Party partnerships’. This makes it difficult for the company to capitalize on future promises. However, it would be interesting to see if the company survives the brunt of time or succumbs to the collapse in the market demand owing to lack of diversity in operation and opening of the market in the post Covid period.