Swiggy plans to add over 430 Instamart dark stores by March, eyes contribution break-even next year
- The firm plans to take quick commerce dark store count from 609 to 1046 by March 2025; targets consolidated group-level positive adjusted Ebitda by Q3 FY26.
Newly listed food and grocery delivery firm Swiggy is looking to increase its Instamart dark store count from around 600 to nearly 1,046 by March 2025 as well as increase their average size by 30-35% to keep up with the growing demand for wider assortment in the highly competitive quick commerce sector.
In its maiden post-earnings analysts’ call on Tuesday, the Bengaluru-based company said it is replacing some of its older, small-format stores sized 2,500-2,800 sq ft with larger stores sized 3,500-4,500 sq ft that can house up to 20,000 stock-keeping units (SKUs). The company will also roll out ‘megapods’ with an area of 8,000-10,000 sq ft in top cities, which can house over 50K SKUs, aiming to serve consumers in 10 to 30 minutes with an extended selection of items.
“The (increase in) average store size is largely also because we did have smaller stores to begin with. To be able to meet the growing demand of assortment, it was important for us to do this and hence this transformation is underway,” said Sriharsha Majety, managing director and group chief executive officer of Swiggy.
Overall, Swiggy expects to more than double its active dark store area to 4 million sq ft by March 2025 (against 1.5 million sq ft in March this year), through a combination of new store additions and larger sized stores, it added.
The guidance to increase the dark store count is an extension of the firm’s strong order volume growth in the September quarter, Majety told analysts, adding that it is aggressively expanding to keep up with the increased competitive intensity of the industry. The expanded dark store area with a larger selection is expected to lead to a higher share of user spends and improved average order value, according to the company.
Also read | Breaking the “jinx” of confidential IPO filings: Swiggy’s Sriharsha Majety on running a newly listed company
The changes are expected to help its quick commerce arm Instamart to reach contribution break-even by the third quarter of the next financial year (FY26), the company said. At a consolidated group level, Swiggy expects to achieve positive adjusted Ebitda in the same period. Ebitda is earnings before interest, tax, depreciation and amortisation.
Food delivery plans
The firm expects food delivery—its biggest business by revenue—to grow in the high-teens range this year, while outpacing the category growth of 18-22% CAGR (compounded annual growth rate) in the medium term.
“Food delivery as a category is still at a relatively early stage of its evolution in India. The category continues to be unlocked incrementally by demographic trends of increasing per-capita discretionary income, urbanization, and digitization. As a platform, our effort is towards creating more consumption occasions and use cases for consumers, thereby broad-basing what is largely occasion-and-indulgence led consumption today and widening the MTU (monthly transacting user) base,” Swiggy said.
Swiggy’s food delivery MTU has grown at a CAGR of 14% from FY22 to 14.7 million in the September quarter.
For context, Swiggy’s food delivery business hit profitability last year thanks to higher monetization by advertising, reduced costs of delivery, and controlling variable costs using technology.
Over the last few months, Swiggy has also rolled out several initiatives like 10-minute deliveries under Bolt and affordable options under Pocket Hero and Daily to drive user frequency on the platform. Mint reported earlier this week about Bolt’s performance and why Swiggy is optimistic about its sustained growth.
Bolt is now available in more than 400 cities and already contributes 5% of all food delivery orders on the platform.
Q2 performance
In the September quarter, Swiggy’s operating revenue grew 31% over a year earlier to ₹3,601 crore while its losses narrowed to ₹625 crore from ₹657 crore.
Total expenses shot up 22% to ₹4,309 crore on account of increased investments in its quick commerce arm.
Swiggy’s overall gross order value (GOV) touched ₹11,306 crore during the quarter, against ₹8,703 crore in the year-ago period. Instamart’s dark store count stood at 609 as of the September quarter and average order value (AOV) was ₹499.
Swiggy’s out-of-home consumption vertical, which includes Dineout and events and experiences, saw its GOV touch ₹734 crore compared with ₹501 crore in the same quarter last year, and is expected to break even in the current fiscal, according to the company.
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Business NewsCompaniesSwiggy plans to add over 430 Instamart dark stores by March, eyes contribution break-even next year
First Published:3 Dec 2024, 08:51 PM IST
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