Blinkit - Disrupting the Quick Commerce Industry in India

 Introduction

Blinkit has become a significant player in India's quick commerce sector, recently surpassing its parent company, Zomato, in valuation. With a revenue of over ₹2,300 crore, Blinkit now holds a 46% market share, making it the leader in India's ₹23,000 crore quick commerce industry. This case study explores how Blinkit has achieved this position, diving into the economics of its business model, the insights that have driven its growth, and the strategies it employs to remain ahead of competitors.

 Blinkit vs. Zomato: A Turnaround Story

Zomato acquired Blinkit in 2022 to enter the quick commerce market. Initially seen as a side venture, Blinkit has outgrown Zomato in valuation, now standing at approximately $13 billion. Blinkit's ability to triple its revenue from ₹800 crore to ₹2,300 crore in just one year is a testament to its successful strategy and execution. The company is even projected to break even in the first quarter of FY 2025.

Understanding Blinkit's Business Model: Revenue and Cost Structure

Blinkit generates revenue from multiple sources:

1. Warehousing Services and Marketplace Commissions: Suppliers pay Blinkit a commission for showcasing their products. This accounts for 11-13% of an average order value of ₹600, translating to ₹72 per order.

2. Advertising: Brands pay Blinkit to promote their products on the platform. This adds 2.3-3.5% to the revenue, equating to ₹21 per order.

3. Customer Fees: This includes delivery fees, handling fees, and charges for small cart orders. It represents about 3% of the order value, or ₹18 per order.

In total, Blinkit earns around ₹110 from each ₹600 order, known as the "take rate."

 Cost Structure

Blinkit's cost structure includes:

1. Last Mile Delivery: The cost of delivering the order to the customer, which is about 7% or ₹42 per order.

2. Dark Store and Warehousing Costs: This includes the costs associated with maintaining dark stores and mid-mile logistics, around 6.5% or ₹39 per order.

3. Variable Costs: This includes packaging, customer support, and payment processing, approximately 2% or ₹12 per order.

4. Customer Acquisition Costs: This is the cost of discounts and incentives offered to customers, roughly 0.2-0.3% or ₹1.8 per order.

After subtracting these costs, Blinkit earns a contributing profit of about ₹15 per order. This figure is not the net profit, as it doesn't account for fixed expenses like salaries, rent, and depreciation. However, Blinkit is now contribution margin positive, a critical milestone for any business.

The Scale Insight: Dark Stores Decoded

Blinkit's success in scaling its operations is largely due to its network of dark stores—small warehouses located close to customers, enabling rapid deliveries. With 451 dark stores in 27 cities, Blinkit has outpaced competitors like Instamart and Zepto. These stores are strategically placed based on factors such as average household income, traffic patterns, and population density. Each dark store is supported by a much larger mother warehouse located on the outskirts of the city.

The efficiency of these dark stores is evident in their performance metrics. A well-run dark store can generate a gross merchandise value (GMV) of ₹90,000 per square foot, compared to ₹47,000 for a highly organized supermarket like D-Mart.

Cracking High Average Order Value

In the quick commerce industry, a higher average order value (AOV) directly translates to higher profitability. Blinkit has managed to achieve an AOV of ₹635, significantly higher than its competitors. This has been driven by an effective SKU strategy that offers a wide variety of products, including high-ticket items like iPhones and PS5s. This approach not only boosts the AOV but also enhances customer perception, positioning Blinkit as a one-stop marketplace for all needs.

New Customer Acquisition: The Zomato Effect

Blinkit's market share wasn't always at the top. In 2022, it was at 32%, with competitors like Instamart holding 52%. However, the acquisition by Zomato provided a significant boost. Zomato, with over 100 million active users, integrated Blinkit into its app, allowing users to access Blinkit’s services without leaving the Zomato platform. Even a small percentage of Zomato's user base migrating to Blinkit could result in a substantial increase in Blinkit’s customer base.

Interestingly, Zomato has kept the two apps separate, a deliberate choice based on the belief that super brands perform better in India than super apps. This strategy has allowed Blinkit to maintain its strong brand identity while benefiting from Zomato's vast user base.

Conclusion

Blinkit’s rise to the top of India’s quick commerce industry is a story of strategic execution, innovative thinking, and leveraging synergies with its parent company, Zomato. By focusing on efficient operations through dark stores, driving higher average order values, and effectively acquiring new customers, Blinkit has positioned itself as the leader in a highly competitive market. As the company continues to expand, especially in underserved regions, its growth trajectory looks promising, making it a key player to watch in the coming years.