Zomato pulls out of Groceries and Nutraceuticals

Zomato pulls out of Groceries and Nutraceuticals
by 5paisa Research Team 12/09/2021

One of the unique features of digital players is speed and flexibility. In a show of alacrity, Zomato has taken a decision to pull out of groceries retailing and its nutraceuticals business and concentrate on its core food delivery business. Zomato will also exit its much smaller nutraceutical business selling health and fitness products.

Zomato was running grocery deliveries on a beta basis. However, its experience was of poor customer experience as well as gaps in order fulfilment. In the last few years, a number of dedicated logistics focused companies have come up in the digital space, and substantially crunched the time to delivery. Zomato did not see too much value in investing resources in this area.

There is one more reason for Zomato to stay away from delivery of groceries. It recently picked up 10% stake in Grofers and would prefer to leverage the groceries delivery franchise of Grofers to spearhead that side of the business. Grofers has fine tuned groceries down to delivery in under 10-20 minutes through a fine-tuned collection and deep-tech delivery model. Zomato would rather develop on this model rather than reinvent the wheel.

Zomato had entered the groceries delivery business during the pandemic last year but with activities getting back to normal, it does not see too much benefit. Also, Zomato hopes to derive better outcomes from its Rs.745 crore investment in Grofers. Hence, Zomato has already clarified that it does not intend to get into this activity of groceries delivery and would prefer to leave to specialists like Grofers.

Zomato has already communicated to all its grocery partners, that it will shut its grocery pilot effective 17th September. Grofers offers delivery of groceries in as short as 10 minutes. Grocery delivery is a different ball game relying on smart hub locations, supply chains and deep tech to understand customers better. That is not the core competency of Zomato anyways.

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