Zomato

In 1965 Mick Jagger used to sing; ”I can’t get no satisfaction”

But now you can – get ”Instant satisfaction”

In the Brave new world, (Aldous Huxley 1932), ruled by internetdriven platform businessmodels where AI and algorithms replace the force of human braincapacity, we are no longer able to run our daily life in a structured way. A normal task like planning and buying a weeks supply of groceries in the supermarket is now disrupted.

The combination of smartphones and social media has made our brains addicted to Dopamine. As a result the next generations attention span is limited. We need ”Instant satisfaction”

Dont worry. You are in the kitchen cooking dinner. You realize you our out of tomatos for the pasta sauce. No problem, now you can order groceries on Blinkit.com, Zomato’s internetshop for food. It will be delivered to your doorstep within 10 minutes.

Its a relatively new service here in India, launched last year. Zomato has built a network of ”darkstores” in Indias largest cities, local wholesale outlets on a franchise basis. Very often the local cornerstores, (Kirana stores), act as the franchise takers. Delivery is also outsourced to freelance drivers, similar to how Uber Food or Meituan Dianping, (China), operate.

Mr. Modi is pleased, it is jobcreation for the uneducated people.

It is a capital light model. Each darkstore carries 5000 to 10000 items. Groceries, supplies, vegetables but also Iphones if you need one, or you can order printouts of your photos and get delivered – all in 10 minutes.

Demand in urban India is growing like wildfire. Everyone I talk to use the service. Going to the store means wasting an hour in traffic, hot and humid climate does not help.

Why leave your airconditioned apartment when you can order online – and get it in 10 minutes.

I manage to speak with the CFO of Zomato at a dinnerparty arranged by Jefferies.

In India Domino’s Pizza, (Jubilant Food), used to offer homedelivery of your pizza within 30 minutes. If it came late it was free of charge. Very popular here. I asked the CFO if he got the Blinkit idea from his childhood pizzaorders. Yes he said, except we still charge if delivery is late.

Each store service an area of 2 kilometer. One important factor why this model works in India is low cost of logistics. The drivers earn 50 cent an hour. Drivers do two deliveries per hour. Average basket value is USD 7,6, (Rs 635). Delivery cost relative to value of ordervalue is low.

This model is all about scale. The rollout to new location is fast and will go from todays 639 to 2000 stores in a couple of years.

Let me give you an example of the growing demand for the service. In one of the gated communities in Bombay, with 250 apartments, typical middleclass households, the average number of deliveries per day is above 600, ie 2 orders per house per day. The doorman is desperate for a raise – his jobdescription has changed drastically.

Zomato is making profits this year, but the Blinkit service still needs to scale up to reach break even. Zomato had its IPO four years ago. Blinkit was aquired by Zomato in 2022. It is one of the most popular stocks for retail investors and the stockprice is reaching for the sky. Valuation is 199 x earnings. Priced for perfection.

Welcome to the Brave New World

/ Gunnar Påhlson, Bombay, 24-09-20