Why did Swiggy stop the grocery marketplace?

In the wake of the dreadful coronavirus – which outbroke in India in the early part of 2020 – a lockdown was implemented from about mid-March 2020. In the unprecedented move – a lot of us were left baffled and with no choices for groceries and daily essentials. It was then that the like of Swiggy picked up the need and started to onboard grocery stores as Swiggy Grocery Partners and service the urgent and pressing needs of customers. The model by which Swiggy operated was a hyperlocal delivery mechanism or a pick and drop mechanism. In this model, Swiggy connected the local nearby grocery store to the customer. After the customer placed an order on the Swiggy application, Swiggy assigned a rider to pick up the groceries and drop them at the customers' location.

Though in that period of time when things and macro factors were so unpredictable – this form of grocery delivery was the norm and accepted by the customers. But as time went by, and the gradual easing of lockdowns this model started to fade away and Swiggy shut the grocery marketplace model. “With things getting back to normal, the number of people opting for online ordering of groceries from food delivery apps has diminished,” said a senior industry executive.

Quite a few factors are causing this namely

Proposition: The largest reason for its discontinuance in the long term was that the Swiggy was a convenience grocery provider and not a monthly grocery shopping or stock-up option (like Bigbasket, Grofers, etc). Which is the way post easing of lockdown its need diminished.

Margins: Unlike food or general merchandise items the margins in the grocery side of the business are too thin. The revenue for a long-term proposition is a challenge for the platform owner to make any profit.

Average Order Value: With low margins also kicked in the fact that customers were ordering lower amount value (Swiggy is a convenience grocery shopping). Because of that, the absolute value earned on the entire transaction was lower. Ideally due to scarcity of grocery customers should have ordered more,

-> But due to the variability of the situation customers were conserving cash and ordering absolute necessity groceries in limited quantities
-> Supply chains were disrupted so the grocers were also not having a lot of variety and availability of goods.

Delivery Timelines: One of the most disturbing aspects that Swiggy faced was the delivery timelines committed to the customers were going for a toss. The grocers were not “accepting” the order on the partner application so the rider assignment logic could kick in. Thus, delaying the overall process and causing a lot of customer agitation.

Focus: As the lockdowns eased and grocery stores were allowed to remain open, the grocers started to concentrate on the walk-in customer more, and thus their focus on delivery timelines or the overall online business itself started to deplete.

SKU related challenges:

-> Incorrect SKUs being delivered: At times incorrect SKUs were delivered (by genuine mistake) or to cover up for an available item. This was gradually becoming an increasing trend
-> Unavailable items: A very common issue faced was that the ordered item by the customer from the listing of the grocery partner – was not delivered due to unavailability. This led to a lot of customer dissatisfaction as on certain occasions the cost of delivery does not justify the products delivered.
-> Real-time inventory link: The grocers were supposed to update their inventories on the app daily or mark items that were going out of stock regularly on the app, but this did not happen leading to incorrect available inventory being cataloged and shown to the consumer.
-> SKU Available time: if some of the grocers were adept in maintaining the available inventory on the application very precisely, the key running SKUs were available for a very limited time. Thus, again leaving the customer high and dry for the desired choices. (Generally, there are specific brands and SKU that dominate each category and fast movers).
-> Desired assortments available with two different grocery sellers – leading to a customer having to pay up for two deliveries also a challenge – which the company tried to resolve by asking the grocers to stock a minimum important SKUs for online deliveries – but could not get the grocers to follow it for various macro reasons.

Reverse Logistics: Owing sheerly due to low margins, low average order values, the cost of the reverse of logistics was impossible to be taken on. This led to a lot of discomfort with the grocers as to who was to take accountability for the customers' request for return. Issues like incomplete orders, not for asked SKUs being delivered, expired products, damaged products were some of the customer's complaints. In online business, customer retention is the biggest challenge and a customer loss is lost permanently.

Big Sharks: Generally, when dark stores or big retailing giants were around in an area – the smaller sharks were unhappy that they were not getting adequate orders to continue on the platform. Also, these big dark stores ( https://www.yourretailcoach.ae/dark-store ) or established retail stores were on an even further lower commission thus making it non-viable for Swiggy as well.

Thus the overall philosophy of Swiggy being a convenience partner, low margins, SKUs, and timeline-related challenges led to the discontinuance for the long run.

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This release was published on openPR.