How much of the growth in a city like Delhi is coming from category expansion? What's the scope there over the next few years?
That is not something that we want to necessarily talk about in a lot more detail because we don't give a category breakup. The growth, for us, across all categories has been pretty secular. That's the only thing that we would like to share at this point.
On competition - if competitive intensity rises, will your strategy change in the short term versus what you pointed out?
As we mentioned in the letter, we'll have to react to the circumstances. We've been fairly clear on this one, now and in the past, that we'll respond to what the market is, and we'll do the right thing. Making sure that we maintain our leadership position is important for us, and making sure that we give the best service to the customers is important for us. So, we'll have to play by the ear on that one.
Do you think potentially with GLP-1 drugs becoming generic in India, there could be a risk to food consumption and especially food delivery of your business?
No comment on it. It is still a new paradigm. And so far, I don't think we have seen GLP-1 impact in food delivery in many other countries. But as I said, it's fairly nascent. Theoretically, it can go either way, but too early for us to have a point of view or share that with you.
Moving to inventory ownership - is it a meaningful competitive advantage or doesn't really move the needle in terms of market share?
I'll leave that for you to comment there. We don't have any point of view on competitors' business model. We can answer questions about our business.
Now that you're north of $5 billion in GOV and MTU is north of 15 million - do you have any sense as to when does this quick commerce industry start tapering off, if at all? Where do you think eventually MTUs or GOV may end up in the next two to three years?
The growth momentum remains strong. And at least for the next two years, we feel that the growth rates will be high as we are still building out more infrastructure, and getting to 3,000 stores will take time. Beyond that, it's very hard for us to comment on how large this market could be. It's a function of how deep can we go in certain categories that are small today and how sustainable are the economics in some of these categories.
Three months ago you were saying that the competition is probably getting worse. This time you've called out that you expect margins and absolute losses to get better. Would you be able to give any new breakeven timelines now for the quick commerce business?
See, Manish, that number is not important for us because it's a function of the weighted average of mature stores and new expansion. So directionally, as you can see, the margins have improved from -2.4% to -1.8% in this quarter. What we are saying is we expect that projection to continue, subject to competitive intensity remaining the same. So from here on, how long therefore, does that take to cross 0 is a function of how fast we're able to expand, and expansion also is not fully in our control because it's dependent on various external factors. So, we're not keen to give that number.
Part of the Hyperpure business will come off just because that was the marketplace business for QC. Can you give us a breakdown of how much was the restaurant business vs QC business within Hyperpure?
Aditya, we have given that breakup in the last shareholders' letter. If you could refer to that, we have the breakup by both the restaurant and the non-restaurant business for the last four / five quarters.
You're already close to around 17 million MTCs versus 23 million in food delivery. What percentage of your quick commerce users are unique, which probably will not be transacting on your food delivery side?
Swapnil, we have talked about it in the past, but we don't disclose that metric anymore. But the number of unique customers in quick commerce is increasing. It's on an increasing trend because logically, we cater to different customer segments as well. The overlap is not very high - is what I would say. There is a large user base on both sides, which is fairly distinct.
What is your top cities share in the overall GOV or NOV for the Blinkit business? And how has that moved from the previous quarter?
Not a very significant movement, Swapnil. Majority of our business is still in the top 20 cities.
How do you see going-out losses in the near term? You've given a slightly longer-term commentary.
We don't want to provide any guidance on the short term at this point, but I don't expect the losses to meaningfully increase from where they are. They'll remain range-bound in the near term.
What would be the AOVs currently for the Bistro business? And any sense as to where you see those AOVs going for that business?
We are not disclosing that, Swapnil.
You are on 3.9% Contribution margin this quarter on a NOV basis. Last year was 4.9%. Without the 100-basis point IOCC impact, do you think you get to that in the next few quarters on Contribution?
We've already shared that our margin will improve over time. So yes, eventually, the Contribution margin will increase. We're not giving any such guidance. We've already shared a lot of information in the letter, which gives a sense directionally of how we think of the business. Asking for more detailed quarter-by-quarter projection, I don't think it's fair. It's a competitive market. So, I'm requesting you to please refrain from getting next quarter's projections from us because that does not help the business or our shareholders.
On leadership with rotational style limited to two years - how do you really measure this impact? What are the KPIs under which you decide that the stint can be further extended or not?
Gaurav, we don't want to discuss and disclose that here. That's not the conversation we want to have on this call.
Our average GOV per day per store over the past four/five quarters has been extremely stable despite the fact that dark stores have gone from 600+ to 1,500+. Can you give some color on throughput from your relatively mature dark stores? Where do they end up stabilizing? And at what level of GOV per day per store do you start dividing the presence in the same area?
We still haven't reached the point of hitting max throughput capacity at any of our stores. Of course, the more volume we do from a store, we also learn, and we adapt to it as well. To the second point, we don't disclose that information. That's part of our strategy as to how we go about actually opening stores.
On quick commerce: can you give us a sense of how same-store sales growth compares with growth from new stores given that we'll probably see store additions potentially begin to slow down? And if competition is able to raise capital, will your strategy change in the short term?
Same-store sales growth is not a metric that we track internally because of the structure of our polygons and the catchment area that a store serves - that changes quite dynamically. But when we look at existing polygon versus new polygons that we open, most of the current growth has come from existing polygons. Even in this quarter when we opened a lot more cities, less than 5% of the overall growth came from the expansion areas that we were not serving earlier.
On food delivery: MTC growth is coming back after three quarters of flattish behavior. What are the key initiatives that helped? Can the momentum of increasing MTCs stay? And are there any changes in the way you'll run the business under new leadership?
MTC growth is fairly in sync with the overall NOV growth, if you look at it on a year-on-year basis. Quarter-on-quarter, yes, it can appear to be lumpy but if you look at it from a more longer term, I don't think there is any divergent trend there, and we expect that MTC growth to continue along with AOV growth, which should continue driving the growth of the overall business going forward, like it has in the past. There will be changes under new leadership, but nothing that we want to highlight or talk about yet.
On inventory ownership: are you going to move almost all of your inventory to 1P over the next two to three quarters like you mentioned in the letter? And will the margin benefit also be immediate in that two to three quarter period?
Yes. Manish, broadly that's the plan and your assessment is right. That's what we expect. In that timeframe, we should be able to move most of our business to inventory ownership and the margin accretion should also happen in that timeframe.
You have 3,000 store visibility, but you'll update on those after you reach 2,000. Does that mean the number 3,000, you will eventually get to?
Yes, that's right.
You don't give up the category mix, but is there a path for non-grocery to become larger than grocery? Or do you still expect grocery/FMCG to continue to be a disproportionate share of your GOV?
That will follow the consumption trend overall of the country. So, if the household share of buying groceries is always higher, then I don't think you will necessarily see the non-grocery segment being bigger than that. It's actually much more related to what consumers are buying rather than what the platform offering. Since we are more of an everyday app and becoming more and more horizontal, the category trends will also mirror just what consumers buy.
In your ROCE calculation on Blinkit, you've laid out the assumption of about 18 days of working capital. This is significantly lower than retail or traditional retailers like DMart. Is this because you do not have to maintain as much shelf inventory? Or is it your just-in-time model?
I don't think Aditya it's a like-to-like comparison with something like a DMart because for one of the largest categories, for example, general merchandise, they typically have much higher days of inventory, and that is owing to the way that they also source these items. However, because of the way that we replenish and the frequency at which we are actually able to move products in our supply chain, we are structurally better off than most retailers that you would see across categories in the days of cover that we need to have, in order to make sure that there is good availability for customers.
You mentioned that speed, assortment and customer support are almost more important than price. Does this mean you're seeing segmentation - players like Reliance or DMart going after value and Blinkit filling the gap for convenience channels?
I don't think that we will be able to classify that because our business works with all of these things together. The flywheel around delivering pricing value to customers is also something that we focus on, and we can't ignore it. And our customers also need to feel that they get the best prices on our platform as well. For us, all of these things have to go together. On segmentation, I don't think it is a question of whether customers are going to fulfill their needs via a different value proposition, which is maybe 2-hour delivery or 3-hour delivery. We are not keen on exploring that segment. The moment it moves out of 10 minutes, then the entire equation changes.
You mentioned food delivery margins could be sacrificed to drive growth. Is that understanding correct?
There's always a trade-off. What we are saying is that while in the long term, margin expansion is possible, but in the near term, we are more focused on growth. And hence, therefore, the margins could remain around the mark they are today.
On 1P inventory move - when you say you will move to 1P in two to three quarters, is that for all the stores? Or do you need to do bottom-up to figure out which stores you should do 1P and which you should do 3P?
Our move to 1P is not necessarily linked to stores. Stores are just a point of storage. The broader idea is who owns the inventory on the balance sheet. On that, what we're saying is eventually, most of the inventory will be owned by us as the Company.
In moving to 1P, from a top-line perspective - NOV/GOV, revenues - it doesn't change anything, right? Or will something change from an assortment perspective and therefore on GOV/NOV?
On the assortment side, nothing will change in the selection. Moving to 1P reduces the administrative burden, the licensing burden, all of that significantly for both us and the brands; we do expect that there will be some positivity in terms of operational metrics around availability, fill rates that will improve on the platform. But otherwise, nothing changes in the trajectory or the business itself.
On contribution margin versus adjusted EBITDA in quick commerce - contribution is flat and adjusted EBITDA is getting better by 60 basis points sequentially. What does that imply - is it mostly marketing leverage or corporate overheads?
That's what it is, mostly marketing. And also operating leverage on the fixed cost. So, both of them. Those are the two costs below Contribution. So, on both, there is improvement in terms of percentage margins.
In quick commerce, ideally with your expansion ratio coming down as the number of new stores (as a percentage of existing stores) keeps coming down, your Contribution margin should keep moving in the right direction. But this quarter was largely flattish to down. What are the various moving parts that drive your Contribution margin movement?
In addition to the share of new stores, there are other elements. One, for example, we mentioned is the seasonality impact on certain costs, especially delivery partner costs. Second, there is competition. Competition also has an impact on various lines in the P&L Contribution. And of course, there is infrastructure build-out in the form of warehousing as well. Apart from stores, some of the warehousing expansion is more lumpy where you invest upfront, but you start seeing utilization over a slightly longer period of time. These other three factors also play into that eventual Contribution margin.
On food delivery growth bottoming out - what initial things are you watching that make you more confident on this? And on food delivery partners being stagnant - how much leverage do we have pulling this metric while Order numbers keep growing?
Basis what we have seen so far in the first three weeks of the quarter, the year-on-year growth has sort of bottomed out and we are seeing now better app opens from our consumers and better resurrection rates. So, there are early signs which is why we think that we should see better growth from here on. On delivery partners, the metric that is directly linked to the size of the business is the log-in hours of these delivery partners because, as you know, these are all gig workers. Utilization, or rather the idle time of delivery partners on the platform, continues to come down. And as that happens, we're able to do more Orders with the same number of log-in hours that we have on the platform.
Given the AOVs in the smaller cities is 10% lower, in the top cities naturally without specific interventions from your side, are basket sizes still continuing to rise?
Over the longer time horizon, yes, they are continuing to rise, but sequentially you might see differences because seasonality plays a very, very big role in the AOVs.
On the switch to inventory model - for small sellers or D2C brands in terms of how they get onboarded or featured or promoted on the platform, does anything change at all with this switch?
No, Vijit, the tools that the brands use to promote themselves, to advertise on the platform or to also feature some of their products, all of that remains exactly the same. The only way to sort of look at it is that this is more of an administrative change for us and the brands. It just makes the burden of compliance a little bit easier for them. But commercially, nothing changes dramatically.
Usually, you have annual wage revision impact in the September quarter in Zomato. Has that changed here? Or should we expect that kind of fixed cost increase next quarter?
Appraisal cycle remains the same, Vijit.
Our NOV growth has come down from 27% YoY last year same quarter to 13% now. What would you attribute as the major driver? And when talking about the number going back to 20%+ next year, where would that incremental growth come from between frequency and AOV?
Essentially, it comes down to the number of customers transacting on our platform and the average order values. There has been a slight slowdown in the number of transacting customers and the number of app opens that we're seeing on the app during the year. And therefore, year-on-year, some of that growth has been impacted, and we've talked about it over the last couple of quarters. And like we said earlier in this call as well, the expectation is that the transacting customer growth should be higher as customers return to the app.
In terms of ESOP costs, from an expectation perspective, what trajectory should we think about? Is there any change in the recent past around that?
Rishi, in the past, we have given a guidance on our total employee cost as a percentage of revenue, which includes both the cash compensation and the ESOP charge. So, we're still sticking to that guidance that we've given last time.
I see a bit of a divergence in business models - you guys don't have megapods, you don't have the MAX saver equivalent. The question is there's a good amount of opportunity to also focus on customers who don't necessarily want everything in 15-minute basis but AOV is much larger - 30-40 minute delivery timeframe?
Sachin, we don't see the opportunity there. So that's why we are not doing that.
For District, you did mention dining out, movie, sports, concert ticketing as a focus. Any thoughts of also focusing more on travel because there is a good amount of opportunity to cater to the premium user base?
Not at this point, Sachin. We remain focused on the existing set of use cases for now and lot of work to be done on those ones. So, in future, of course, we can evaluate anything. But right now, in the near term, we'll remain in the categories that we are in today.
You're indicating food delivery growth could be a bit slower than 20% for this year. As quick commerce becomes big, there could be more impact on food growth. Should the steady-state growth be around 20% with margins a bit better? Is there any risk to the overall growth for the industry in the medium term because quick commerce is becoming bigger?
Quick commerce has definitely been a headwind to some extent for the food delivery business because some of that consumption has also moved to quick commerce. But having said that, we still believe from an inflation standpoint and opportunity standpoint, we still do think that in the long term the business can grow at 20%, although that visibility is not there in the near term at this point. But there's enough going for us to be excited about the business. If we do well and we are able to innovate and unlock more use cases for food delivery on the app, then we can get 20% growth levels again.
Are there any accounting changes we should see on Blinkit from next quarter as you guys move towards an inventory-led model? Should we see any accounting changes in terms of overall numbers for the Blinkit business?
Yes, Sachin. So, we have tried to outline that in question 12 of the letter in terms of three, four things that could change from a reporting standpoint. Revenue will now become very similar to NOV because we own the inventory and Contribution margins, of course, in terms of definition and calculation, will not change. There is an now an interim gross margin of the business, that we'll take a call whether we want to disclose that or not in the next quarter. But outside of that, nothing else should change.