Swiggy’s renewed focus in the “neighborhood convenience economic” or hyperlocal market is given a boost by its strategic investment in Rapido, a Bengaluru-based bike-taxi startup. According to sources, the food delivery giant contributed $125 million to the latest round of funding. The start-up is valued at more than $800 million. For More Updates Stay Tuned With Moneycompanion.us.
Despite strong growth during lockdowns, the Sriharsha Majety-led business has switched its focus to hyperlocal in pursuit of positive gross margins. Rapido with its 1.5million driver-partners (and over 25,000,000 customers) is an ideal match for the company’s core business thesis.
Swiggy Investing In Rapido
Rapido stated that Swiggy’s participation will strengthen the synergies among the companies. It stated in a statement that the two companies share a common mission of delivering superior customer service through increased fleet availability. Rapido’s captains will also benefit from this partnership.
The company also announced that the $180 million Series D round will be used to invest in its technology, expand its teams across capabilities and increase overall supply to improve the consumer experience in the 100+ cities it serves. The funds will be used to fund all three of its categories, namely bike-taxi, delivery, and auto, in order to increase its captain earnings and improve the customer experience.
Rapido, much like Swiggy is a hyperlocal company that places last-mile connectivity at its core. The company operates a ride-sharing service that provides two-wheeler and three-wheeler rides, as well as an intracity pick-and-drop vertical.
Swiggy’s partnership will help address one of the most frustrating problems of delivery platforms: poor usage of riders.
Its primary business vertical, food delivery, is always a two-peak business, lunch peak and dinner peak. Unit-level profitability is severely affected by the low ridership in the mornings, and evenings. Swiggy’s ‘everything delivered’ strategy includes the creation of several new verticals within the local convenience market. Rapido’s fleet network across the country will also be an asset.
This new focus is being driven by Instamart, an express grocery delivery service. Instant now has 23 locations and accounted for 20% of Swiggy’s revenue of Rs 2,547 crore (FY21). According to industry sources, this share is currently around 25%. The company is currently expanding its Swiggy Genie pick-up-and-drop (courier service), subscription-based Supr Daily grocery delivery service, and Meat Stores meat delivery vertical.
The Prosus-backed business delivers food in over 520 cities, provides local courier service in 68 with Genie and offers daily necessities in six. It is constantly expanding its hyperlocal play and requires additional delivery vehicles. In Rapido, Swiggy has a fully-equipped fleet ready to go. Genie has synergies with Rapido’s local pick-and-drop service. However, Swiggy’s growing hyperlocal verticals offer Rapido’s Captains (driver/partners) more opportunities to increase their earnings. Both companies have enough use cases to make effective use of their delivery fleet through close collaboration and integration.
Rapido and Swiggy share a vision of a logistics platform that empowers riders with more opportunities and better earnings. The majority stated that although we have been working together for some time, this investment allows us to better align to maximize the synergies among the platforms and increase the value we offer to both consumers as well as delivery executives/captains throughout the country.
Swiggy’s ‘everything delivery” model allows it to reduce discounts across its platform and allows it plug all its riders into one unit which allows for better utilization of its delivery fleet. Because deliveries are faster and more spread out over the day, riders can fulfill more orders per hour. This allows Swiggy to lower the incentive per delivery without affecting the rider’s earnings.
Integration of taxi services into the app can create a new use case for Swiggy riders partners. It can also help the company increase its platform play by adding another category, which can significantly increase the open rate. Customers will be able to use Swiggy app for multiple purposes, including last-mile connectivity, local courier services, and food. This solves for unit economics as well as rider optimization.