Why Zomato is stopping grocery delivery service from Sep 17, 2nd time since last years? EXPLAINED

Online food delivery platform Zomato has decided to stop its grocery delivery service from September 17 mainly on account of gaps in order fulfillment leading to poor customer experience, marking its exit from the segment for the second time since last year.

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The company had entered the segment last year during the lockdown on account of the COVID-19 pandemic, but exited the business on the recovery of its food delivery business.

The company also said that it believes that its investment in Grofers will generate better outcomes for its shareholders than in-house grocery efforts. Zomato has invested USD 100 million (around Rs 745 crore) for acquiring a minority stake in grocery delivery platform Grofers.

In an email to its grocery partners, Zomato said, "At Zomato, we believe in delivering best in class services to our customers and largest growth opportunities to our merchant partners. We don't believe that the current model is the best way to deliver these to our customers and merchant partners. Hence, we intend to stop our pilot grocery delivery service effective 17 September, 2021".

The email mentions that "store catalogues are very dynamic and inventory levels change frequently. This has led to gaps in order fulfillment, leading to poor customer experience".

In the same time period, the express delivery model, with under 15 minute delivery promise and near perfect fulfilment rates has been getting a lot of traction with customers and expanding rapidly, the company said in the email.

"We have realised that it is extremely difficult to pull off such a delivery promise with high fulfilment rates consistently, in a marketplace model (like ours)," it stated.

When contacted, a Zomato spokesperson said, "We have decided to shut down our grocery pilot and as of now, have no plans to run any other form of grocery delivery on our platform. Grofers has found high quality product market fit in 10 minute grocery and we believe our investment in the company will generate better outcomes for our shareholders than our in-house grocery effort."

In July Zomato CFO Akshant Goyal 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".

Zomato had launched the pilot grocery delivery service in July this year in select markets offering grocery delivery within 45 minutes to its customers.