Zomato pulls off grocery delivery business. Impact of public listing and hence closer scrutiny?

Zomato announced that it is stopping it’s pilot of grocery delivery services from September 17th.

Reasons mentioned by the Company –

  • It’s inability to provide good quality customer service consistently especially due to the increased customer expectations with 15 minute delivery promise.
  • It’s investment in Grofers that it believes would handle this segment better and hence would create better shareholder value instead of in-house grocery efforts. Grofers (as per Zomto) has found high quality product market fit in 10 minute grocery delivery business. In August 2021, Zomato got CCI approval for USD 100 million (around ₹750 crore) investment to acquire 9.3% stake into Grofers.

I believe this is a step in the right direction.

Though Company’s CFO Akshant Goyal had sounded very bullish on this segment in July when he had said “It (grocery) is a large opportunity. The online grocery is nascent right now but is growing rapidly not just in India but across the world… “We are actively experimenting in that space and recently invested USD 100 million for a minority stake in Grofers, with the idea of getting more exposure to that space and building our strategies and plan around that business”.

Given the above statement, one would not have expected Zomato to pull off direct participation so soon !

However, guess that’s what the compulsions of a listed entity are which are always scrutinised more closely than private entities.

Or is there something more strategic here?

E.g., Zomato looking to increase stake in Grofers… so why to duplicate efforts… only the time will tell !

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