Swiggy's Food Delivery Business is not Concentrating on Expanding into New Cities

The food delivery industry has reached a saturation point in terms of the number of cities; thus, foodtech giant Swiggy is concentrating on strengthening its position in the current locations rather than expanding geographically. Following the release of its financial results for the second quarter of FY25, the company emphasised during its earnings call that there is no longer any business case for growing into an additional 50–100 cities. According to the corporation, there isn't a strong commercial rationale for expanding to another 50 or 100 locations; therefore, doing so would primarily be a selfish exercise.

Swiggy is instead focusing on expansion in high-potential metropolitan areas with growing migrant populations and developing communities, such as the new Bengaluru and Delhi NCR neighbourhoods. Cities like Bengaluru and the National Capital Region are no longer confined to their central regions. According to Swiggy CEO Sriharsha Majety, the company's expansion into neighbouring zones—which Swiggy refers to as Tier 1.5 locations—is growing more and more important as new customers in these areas look for affordability.

Changing Business Strategies

Affordability is still a major factor, the CEO continued, particularly for markets like regular corporate lunches, where maximising delivery speed by distance is essential. Core city rents are also rising. In the meantime, Swiggy is trying to satisfy the increasing demand from customers for more options for its rapid commerce vertical, Instamart. It is still difficult to strike a balance between this and delivery speed, though. Although consumers anticipate a wide selection of goods, Swiggy claims that its current business strategy can supply up to 20,000 SKUs in 10 minutes. According to Majety, the corporation would have to make a minor compromise by lengthening the delivery time if it wanted to increase the assortment beyond this range.

Adding New Dark Stores for Business Expansion

Rahul Bothra, the CFO of Swiggy, told a media outlet last month that the company's new dark stores would essentially occupy an area that is two to three times larger than its existing dark stores. In addition to expanding the company's SKU coverage, adding dark stores will provide a variety of delivery options; for example, Swiggy Instamart can deliver some items in 10 minutes and others in 20 minutes, Bothra stated. On December 4, Swiggy announced that its operating revenue had increased by 30% to INR 3,601.45 Cr, while its consolidated net loss had decreased by 4.78% year over year to INR 625.53 Cr. In the quarter ending in September 2024, Swiggy Instamart's operating revenue increased 135.7% to INR 490 Cr from INR 208 Cr in the same time the previous year.

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StartupTalkyNitin Konde