India’s quick commerce market, dominated by startups like Zepto, Swiggy and Blinkit, has caught the eye of established e-commerce giants like Amazon, Flipkart and Reliance. In a bid to capture a sizable share of this fastest-growing market, these big players are either launching their own online delivery platforms or acquiring existing ones. In line with this strategy, Amazon is reportedly in talks with IPO-bound Swiggy to acquire its quick commerce platform, Instamart.
According to the Economic Times, Amazon has expressed interest in either acquiring a stake in Swiggy’s Instamart during its pre-IPO placement or considering a full buyout. However, discussions are still in the early stages, and the exact nature of the deal remains unclear.
Hurdles in Potential Acquisition of Instamart
People aware of the matter said that Amazon, being the biggest e-commerce company, typically does not pick up minority stakes. That’s why it’s quite unlikely that the talks between Amazon and Swiggy would be for a minority stake in the company or Instamart.
Sources also revealed that Swiggy is not inclined to sell Instamart as a standalone entity, while Amazon is not keen on acquiring the entire food delivery company. This hesitation is primarily due to Swiggy’s high valuation of $10-$12 billion. Additionally, the growth of the food delivery business is expected to slow down in the coming years, considering Zomato and other major players aggressively expanding their customer bases.
Amazon’s potential acquisition of Swiggy Instamart is also debatable, as the company has reportedly been developing its own quick commerce service for months. If this is true, acquiring a stake or the entire quick commerce business of Swiggy might not make strategic sense.
Competition in India’s Bourgeoning Quick Commerce
The quick commerce market in India, currently valued at $2.8 billion, has been witnessing phenomenal growth since its inception during the COVID-19 pandemic. Millennials and Gen Z are driving the growth, particularly in metro cities.
Witnessing the changing consumer preferences and growth of quick commerce startups such as Zepto, Zomato’s Blinkit, and Swiggy Instagrart, Traditional e-commerce platforms have been fearing they will lose their customer base to these startups. Therefore, they are adapting to this shift towards ultra-fast online delivery, typically within 10-20 minutes.
It is important to note that Amazon is not the only one in talks about acquiring a startup in the quick delivery space. The trend began with Tata’s acquisition of Bigbasket in May 2021, followed by Zomato’s acquisition of Blinkit in August 2022.
Flipkart had also explored a similar deal with Swiggy and Zepto, although both deals ultimately fell through. In response to these setbacks, Flipkart is gearing up to launch its own quick commerce service, Flipkart Minutes, in the next few days, and is also preparing to set up around 100 dark stores.
Amazon Acquires Swiggy Instamart: A Win-Win for All?
If Amazon successfully acquires Swiggy Instamart, it will pose a significant threat to Zomato’s Blinkit, Zepto, and other quick commerce players. Here’s why:
Massive Customer Base: Amazon’s extensive e-commerce customer base, combined with Instamart’s existing users, would create an unparalleled powerhouse in the quick commerce sector. As a result of this merger, the new entity will already have a ready-made customer base, which will help it acquire more revenue and, ultimately, significant market share.
Financial Muscle:Â Amazon, with more than $80 billion of cash in reserve, could heavily invest in Instamart, ultimately expanding its reach across India and offering substantial discounts and promotions to attract more customers compared to its rivals. The company is popularly known for creating a huge war chest while entering a category or a market.
Robust Logistics Network: Amazon’s extensive and well-established logistics network across India presents a significant opportunity to enhance Instamart’s delivery speed and operational efficiency. Leveraging this infrastructure could make Swiggy Instamart even more attractive to consumers seeking faster deliveries.
Advanced Data and Technology: Amazon has expertise in data analytics and technology. By integrating Swiggy Instamart with its existing infrastructure, the tech company could personalize user experiences, optimize delivery routes, and potentially reduce costs.
Even though Blinkit and Zepto have carved a niche with their ultra-fast deliveries, attractive offers, and discounts, Amazon’s resources would allow Swiggy Instamart to match or even potentially outperform all its rivals in various aspects. If Amazon and Swiggy Instamart acquisition deal comes to fruition, it could significantly disrupt India’s quick commerce market.
