Swiggy Instamart: The TAPED model of success
January 2022 was a defining month for Swiggy Instamart. It logged in over a million orders per week from Swiggy Instamart (the quick commerce arm of food aggregator Swiggy). We know that the pandemic has revolutionized the ecommerce industry with the introduction of quick commerce across the world. India was not behind with players like Swiggy Instamart, Zepto, Blinkit venturing into this domain of delivering products to our households within 30 minutes or less. Today, Instamart has become synonymous in every urban household. You can place an order for 1 product or 10 products and you will get the order delivered to your house in the next 10–30 minutes.
Amidst the huge variety of quick commerce players, how does Swiggy Instamart come out with flying colors to log in million orders?
The working of quick commerce players depends on T.A.P.E.D (Technology, Assortment, Pricing, Empathy, Delivery). Let us analyse how Swiggy Instamart fares in these factors and what enables it to be so highly successful.
Technology: The introduction of dark stores to fulfill quick commerce orders calls for streamlining of process via automation and ERP solutions which can handle order management and transportation management within each of the dark stores via a central system. Swiggy has hit a masterstroke by implementing a centralized solution in collaboration with external partners who are experts in these domains to completely streamline the processes in dark stores with minimal human intervention. Other companies are still struggling to crack the code as they scale their dark stores.
Assortment: Consumers across geographies could order a wide assortment of products for daily use depending on their requirements. Ensuring that the assortment of the products available to consumers is present in dark stores is the key to having repeat engagement on the platforms. Swiggy forayed into daily home essentials before launching Instamart in February 2019 as Swiggy Stores. They were delivering essential goods in partnerships with marketplaces to consumers albeit in a longer time. This data acted as the holy grail for Swiggy Instamart to build the right assortment of products in the dark stores to ensure stock availability
Pricing: The delivery fees associated with the delivery of products helps quick commerce increase their net margins, but this can reduce the repeat customers and average order value as well. Swiggy identified a tier system which compels the consumers to not only place orders repeatedly on the platform, but also automatically increase the basket size of the order as the delivery fees gets negligible as the order value increases by $0.5-$1 as well. This has enabled Swiggy Instamart to establish domination in terms of getting bulk orders from customers for their weekly groceries as well. Instamart focused on user growth opposed to the traditional model of having a heavy focus on monetization. Their user growth trajectory automatically translated into higher margins and greater monetisation
Empathy: Understanding the needs of the consumer in tough situations of ordering a packet of salt or just a packet of milk to make tea is essential for ensuring that customers are compelled to order online as opposed to going to a mom and pop store 100 m away. Enabling the consumer to order even a single small product worth $0.20 (with some delivery fees) and delivering it within 15–30 minutes establishes trust and allows the future basket size to increase. Swiggy Instamart cracked the code by enabling quick delivery even for a single product as small as a toothpaste as well. Other players empathise equally with the consumers, but Swiggy pips all of them owing to their domination across other factors.
Delivery: The biggest deterministic factor for a quick commerce business to succeed is the speed to delivery. You have to keep the promise of delivering a product to the consumer’s house in under 30 minutes. This calls for a large fleet of delivery intermediaries spread across localities to enable the quick delivery from dark stores to consumer households. Establishing such a huge fleet calls for a huge investment which, in turn can burn through the net margin of the company. The establishment of food delivery business of Swiggy enabled Instamart to leverage the network effects and enable the delivery partners to deliver products just as they do while picking up food from a restaurant. The investment as opposed to other players in the market was negligible which allowed Instamart to burn cash on other discount offers which they can provide to the consumers.
The success of Swiggy Instamart is not something out of the blue. Every upcoming or established quick commerce player can establish dominance in their respective region and across categories by analysing how TAPED is their model and build success across these factors.
*Dark Stores: A retail distribution centre or warehouse that caters exclusively to online shoppers
