How Blinkit Grows 🪴

Hi, I’m Saurabh.👋 I write in-depth analyses on the growth of popular companies. I cover their early-growth strategies, current growth levers, and the business-building lessons we can learn from them.

Hello hello!

I love writing and going down to all sorts of business-building rabbit holes. This newsletter is my way of pursuing both my interests while learning from the best companies.

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A lot has changed in the grocery buying behavior in India over the last decade. I recall buying groceries with my mom at a small mom-and-pop store in my childhood - standing in a huddle, waiting for the shopkeeper bhaiya to scribble our grocery list on his exam pad. Safe to say, it was a long affair. Cut to today, I haven’t been to a grocery store for over 6 months. There is no longer a need to plan groceries weeks in advance. You can order what you need when you need it, and it is delivered to your doorstep in 10 minutes.

Today, we are looking at a company that has been a front-runner in this behavioral shift.

I’m talking about Blinkit, a company that has made grocery deliveries a reflex for 24 million users. With a 46% market share, Blinkit leads the $45 billion quick commerce market in India.

On a different note, I’m aware of the criticism leveled at quick commerce and how it grants people the luxury of not planning groceries and acting on their impulses. I want to keep that thought aside for this article and focus on how Blinkit grows.

Alright, here’s what to expect today:

• How Blinkit started

• Tough Times

• How Blinkit grows today

• Carving the path to profitability

How Binkit (aka Grofers) Started?

2013 - 2016 was the time when Indian hyperlocal startups were on the rise. Unlike e-commerce, wherein the order was pick-packed from a warehouse 500 km away, hyper-local dynamics operated in a 3 km radius. Think of any offline activity within your 3 km radius such as restaurants, groceries, couriers, and pharmacies, these startups were building technologies to trim down their service time. Startups like Instacart, Doordash, and Postmates with similar business models had received wild success in the US and Indian founders quickly caught up.

With the rise of the “gig economy,” this shift from a 2-sided marketplace to a 3-sided marketplace started gaining momentum, and soon, India’s “Uber-for-X” revolution began.

Saurabh Kumar was one of the entrepreneurs intrigued by this growing Hyperlocal industry

Talking to many local merchants, Saurabh realized delivery was their major pain point. Deliveries were coordinated over the phone and WhatsApp, and payments were collected on delivery. For merchants, this meant the daily challenge of delivery manpower availability, lack of customer visibility, and payment operations issues (chutta nahi hai!).

Saurabh thought, Wouldn’t it be much better to make these deliveries on a technology-driven platform?

The idea of simplifying hyperlocal services was born. Saurabh started an on-demand pickup and drop service with his friend Albinder Dhindsa, who initially joined him part-time. They named it Grofers.

The name Grofers comes from two words. First, the North American term ‘Gopher’, which is used for a person who runs around doing tasks and errands, and Second, groceries. 

Gopher + Grocer = Grophers

Meaningful and strong category association - Nice!

Alright, coming back to the story.

Dhindsa, at that time, was working with Zomato as their Head of International Operations. Seeing the opportunity in the hyper-local space, he left Zomato and joined Grofers full-time in 2014.

By January 2014, Grofers started delivering groceries and FMCG goods for businesses in Gurugram with four delivery boys. By September 2014, they raised their seed round of $0.5M from Deepinder Goyal, founder of Zomato, and Sequoia Capital. The startup soon started making waves amongst the top technology investors and, in just 10 months, raised another $165M from Sequoia Capital, Tiger Global, and Softbank.

By 2015, a whole new wave of hyperlocal delivery startups had put their footing in India: Tinyowl, Localbanya, Jugnoo Fatafat, Peppertap, Zophop, Holachef, and any other clever name you can think of. Traxn, a platform for deal discovery for private investors, found that roughly 100 hyperlocal startups were founded in 2014-2015.

When the goings got tough

With more players, the competition became fierce.

By 2016, investors started worrying about the sustainability of hyperlocal businesses. Soon, a lot of new startups started facing the heat. Deep discounting coupled with poor unit economics led to multiple shutdowns and acquisitions. From year 2013 to 2018, hyper-local businesses saw 36 mergers and acquisitions.

Holding the fort

Grofers, on the other hand, with enough funds to run for 12 to 18 months, took a strong stance of moving to an inventory-owned model. They knew this would slow down their unit economic improvement but help them last longer.

With the inventory model, Grofers could keep limited SKUs in the warehouse due to space and cost constraints. However, this limited assortment strategy helped them offer better prices to customers. From 2017 to 2019, Grofers' gross order value went 11X.

Rocky Roads

Over the next 2 years, Grofers went through a tough time. 

The business did not grow as expected in tier 2 cities, and Grofers had to shut down operations in Bhopal, Visakhapatnam, and Kochi. Delayed service and quality issues continued to punch them in the gut.

In 2021, they rebranded themselves to Blinkit and soon pivoted from a 90-minute delivery concept to a 10-minute delivery model. The new name resonated with their core value proposition of 10-minute deliveries. It also aided them in building a distinct identity that stood out in the quick commerce race.

However, this stance faced heavy criticism on social media. Everyone questioned whether 10-minute delivery times lead delivery partners to take undue risks on roads, whether these deliveries make economic sense, and whether such fast deliveries are needed at all.

Blinkit stood strong and believed that 10-minute deliveries might just be the future of hyperlocal commerce.

In June 2022, Grofers was acquired by Zomato at $568M. 

Today, Blinkit's implied value is larger than its core food business. According to Goldman Sachs analysts, Blinkit’s implied valuation in Zomato’s sum of the parts (SOTP) is $13 billion now, versus $2 billion in March 2023. 

That’s an impressive 6.5X in 2 years. How are they doing it? 👇

How Blinkit Grows Today

As far as I can tell, there are 7 forces behind Blinkit’s growth

1. Geographical expansion

2. Assortment Strategy

3. Outdoor Ad Campaigns

4. Personalization

5. Platform ads

6. Social Media

7. Small gestures

Today, we will explore geographical expansion and assortment strategy in depth since they are fundamental to the business scale and lightly touch on the rest.

Blinkit’s dark store explosion

Blinkit is aggressively expanding its dark store presence, focusing particularly on areas outside Delhi NCR, which they believe still offer substantial untapped potential. 

In the Q4FY24, they have added 75 new stores. That’s some crazy growth!

Blinkit’s dark store expansion strategy is two-pronged.

In the push-based approach, they find potential properties in the desired micro market to set up shop. In the pull-based approach, they generate leads by inviting building owners to rent their property or partner with Blinkit to run a dark store on a revenue-sharing basis.

For property partnerships, Blinkit brings its expertise in setting up the space and appoints a store manager, whereas the partner hires staff, runs daily operations, and earns as a percentage of monthly turnover.

The next cities where Blinkit is strengthening its roots are Bengaluru, Mumbai, and Hyderabad. (This will get interesting in Bengaluru because Bengaluru is also the home ground of its rival Swiggy). In Dhindsa’s words

Blinkit plans to move its store count from 526 to 1000 in the next 9 months and anticipates that this expansion effort will stabilize overall adjusted EBITDA around breakeven levels in the coming quarters.

Inside Blinkit’s Assortment Strategy

Over the last few years, Blinkit dark stores have housed 2000 to 4000 items. This is slightly higher than traditional Kirana stores that typically stock 1000 to 1500 items. However, Blinkit has been increasing its product offering significantly, now carrying nearly 8000 items.

The art of assortment strategy is finding the perfect balance between familiarity and novelty. Honestly, Blinkit is a master at this art. Going through their catalog feels like “they really get you.” Their assortment is an excellent mix of essential groceries and craving-induced impulse products and has been growing quarter over quarter.

Let’s look at their category-level assortment strategy and see what’s their primary focus in each one of them

Foodgrains and masalas

If you scroll on Blinkit’s foodgrains and masala section, you will find the city’s top-selling two or three brands placed right next to their private labels -  “Whole Farm Premium” and “Whole Farm” (both differentiated over price). Unlike other competitors, their private label packaging has a nice matte finish, giving a high-quality recall. Like Bigbasket, Blinkit’s focus here is to improve private label adoption in this category, leading to repeat orders and higher contribution margins.

For fruits and vegetables

Blinkit’s priority on fruits and vegetables is ensuring consistent quality and availability throughout the day. They study the day-to-hour scale patterns and identify the next day’s vendor orders as accurately as possible. They also have a well-defined secondary sales process, cutting losses on liquidation.

For snacks, drinks, beauty, and personal care

Their prime focus in these categories is on the product range. Each page is personalized for a specific use case and touches on particular value points people consider when buying craving-induced items. 

For example, look at ice creams on Blinkit. You will discover various use cases, such as family packs, single-serve, and health-conscious segments. The product range, starting from Indian household names like Amul, Kwality Walls, and Havmor to international brands like London Dairy and Baskin Robbins, has it all. New D2C brands such as NIC, Noto, and Get-a-whey are also adding novelty and niche use cases like zero-sugar and high-protein ice creams to this segment.

For functional verticals (cleaners & stationeries)

The focus is on having a limited range but reasonable depth (pack sizes) to meet the demands of different household sizes.

Over the last 1 year, Blinkit has doubled down on packaged food and personal care products. (Roughly 50% of their dark store is filled with these 2 verticals) 

For New Categories

Lately, Blinkit has started venturing into unconventional quick-commerce categories such as electronics, eyewear, mobile and large appliances. 

However, they aren’t berserk about adding items to these categories. If we look at their “Bluetooth Speakers” category, which has a large number of brands and speaker types in the market, they carry a limited selection linked to impulse-based buying use cases.

With great attention to detail on essentials and strategic additions in the upcoming segments, Blinkit has a  double-sided growth advantage as highlighted by Shashank Rathore, VP, of e-commerce at Interactive Avenues, (IPG Mediabrands India)

“If all goes according to plan, we can anticipate a significant shift in advertising contribution, given that these categories boast higher average selling prices, prompting advertisers to adopt a slightly more aggressive stance.”

Winning hearts with outdoor ad campaigns

Blinkit’s clever ooh campaigns are love at first sight. Their positioning of convenience at your fingertips is well reflected in their advertisements. Like its parent company Zomato, Blinkit also gets the city to chuckle with its witty one-liner copies. Here are some punny copies of Blinkit’s outdoor campaign that have created a roar on social media below

Personalization

Personalization helps customers feel seen, fostering a deeper emotional experience. I was awed by how they showed their moat in data-driven personalization last Valentine’s Day.

Based on the historic purchases, the Blinkit homepage has 2 different versions. If you look at the tiles (there are only 6 because of Miller’s Law), they are also curated based on the priorities of the customer's relationship status.

Platform ads and Brand stores

With a large user base comes large advertising opportunities. For a brand, Blinkit is an obvious platform to leverage the power of targeted advertising and connect with 24 million potential customers.

Let’s go deeper into the types of advertising opportunities available for brands.

The ad assets at Blinkit are divided into 3 segments.

1. Product Booster Ads

2. Listing Spotlight Ads

3. Display Ads

Product Booster Ads: These are similar to Google’s shopping and pay-per-view ads that help businesses advertise in a specific category in a non-intrusive way. Product booster ads can be targeted in keyword-based or category-based formats. If you are running a campaign on “Toor Dal,” you can bid on keywords like “Dal,” “Dhal,” or “Toor Dal.” Alternatively, if you want to target a category, you can bid on “Grains and Pulses”

Along with prioritizing the product on search results, it also improves the visibility of the products on the homepage and the cart page with a direct-to-cart add button.

Brand stores: Brand stores on Blinkit allow a unique space on the app where brands can communicate their story and decide how they want to showcase themselves to their customers. This provides a great range-selling opportunity and influences cross-category buyers

Listing Spotlight Ads: These ads allow brands to attract their customers with enticing gifs that take them to a single brand carousel page. This format of ads helps users discover multiple product offerings from the brand in one place and enhances cross-selling opportunities.

Brand Spotlight: In this format, Blinkit offers brand-curated tiles that boost brand awareness and increase purchase intention throughout the customer journey.

Display Ads: Display ads allow brands to cross-merchandize their products and attract customers buying from their competitors. These ads play an overarching role in improving brand visibility and campaign performances

Social Media

Blinkit maintains a strong social media presence on Instagram, Facebook and LinkedIn.

Looking at their posts, I can say that their strategy is to connect deeply with their customers and highlight their convenience USP through engaging gifs, videos, and user-generated challenges.

Small Gestures

Sometimes, the smallest gestures make the biggest impact. This DNA is sprinkled all over Blinkit’s UI. Here’s an example of a thoughtful gesture that makes a positive difference in people’s lives.

• 

  Blinkit’s message on hospital deliveries

  That is some attention to detail!

So, that’s how Blinkit is growing and delighting 24 million users every month. But, what about profitability? 

Carving the path to profitability

Quickcommerce business models get a lot of heat on the internet. On LinkedIn, if you go through the comments of any quick-commerce post, you will find people claiming that the quick-commerce business is on the highway of death i.e., it is “not profitable” or won’t be profitable anytime soon. 

I won’t go that far.

To understand this better, we need to take a step back and understand what makes startups different first.

I won’t be offended if you skip this section and move to what Blinkit is doing to bridge the profitability gap.

Startups, by design, are meant to grow very large, very fast.  This means running them at a loss for a very long time makes sense to gain market share. This becomes even more critical if at least the following three situations

1. Strong network effects: This happens when a product becomes more beneficial when more users use the product. 

Felix Oberholzer-Gee, the author of Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance, explains it well with this quote in his book:

This is evident across social media platforms, marketplaces, data networks, and communication network businesses. Niskanen Center summarizes it well in the graph below.

2. Given the large market gap, you expect competition from VC-backed companies.

3. There are strong economies of scale.

If startups are expected to turn profitable early on, there won’t be any Google, Instagram, or Uber. That said, for any business to be viable, it must make profits at some point. For startups, the right way to look at it is if there’s a credible path to profitability, even if it comes in ten or fifteen years.

So, how is Blinkit carving its path to profitability?

Anthony Robbins, motivational speaker and writer says

“Every problem is a gift — without problems, we would not grow.”

Blinkit’s team seems to have taken the quote to their heart and shown impressive progress over the last year. Their YoY GOV has skyrocketed by 186% in FY24 to a whopping 4027 Cr while cutting costs.

Incredible!

Let’s look at the levers Blinkit is working on to inch towards profitability. 

Improving the Average Order Value and Revenue per order

• Adding and pushing high-margin products: In the last section, we covered how Blinkit goes deep on assortment. If you look at the new categories they have been exploring (electronics, beauty, home & lifestyle, etc.), they all are margin additive to the core grocery business. The most recent additions to the product catalog have been Lenskart and Mokobara, promising the delivery of eyewear and luggage bags within 10-15 minutes.

Within the grocery business, Blinkit’s top search is also dominated by companies with their private label, “Whole Farm Premium,” which brings higher margins than other marketplace brands.

• Dynamic Recommendations: The app showcases trending products in your locality or suggests items based on the time of day. Think late-night snack suggestions or last-minute dinner ingredients.

• Handling Charges: Blinkit charges 5 Rs for handling every order in Bangalore. On an AOV of ~613, this translates to an additional 8% margin per order.

• Surge pricing: Blinkit levies surge charges in peak demand similar to Zomato or cab aggregators like Uber or Ola. Surge prices vary between 20-50 Rs, boosting AOV and revenue/order during peak hours.

• Minimum order quantity: Currently, Blinkit works on a fixed delivery + handling charges in Bangalore. However, differential delivery charges based on cart value is another area that Blinkit can explore in the future.

Commissions, Advertising, and Higher bargaining power with vendors

This meteoric rise in the GOV shows their moat on customer understanding and props up their ad revenue potential.

For brands, Blinkit is an excellent brand for reaching their end users.

For example, Drools Pet Food identified customers who bought items from the brand’s competitors and sent them samples of their products leveraging quick commerce platforms. This led to a nearly 250% jump in the growth rate of its products.

On the vendor side, higher GOV brings economies of scale into action and fuels their procurement bargaining power from manufacturers and distributors.

Dark store and replenishment costs

Another lever towards profitability is refining the dark store efficiency. With a strong understanding of the demand at a micro-market level, Blinkit makes two strategic decisions.

1. The size and rack placement in the dark stores

2. Better inventory placement in the dark store will ensure that the pick-pack process is completed with minimal effort as soon as a rider arrives.

Over time, Blinkit is also striving to lower spillage(wastage) via better matching of user demand and inventory.

Last mile and other variable costs

For densely populated areas (for example, high-rise societies), Blinkit can club multiple orders delivered with one rider. This provides additional room for lowering delivery costs without compromising the quality of service. I couldn’t find if this is done already on Blinkit, but since Zomato does it, Blinkit will likely follow suit sooner or later.

 As Blinkit navigates its journey toward profitability, it remains focused on leveraging its (and Zomato’s) strengths and market opportunities to achieve sustainable long-term growth. So much so that Deepinder Goyal, Zomato’s CEO, believes that Blinkit will grow bigger than Blinkit in 3 to 5 years.

And that’s it for today folks! If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.