Amazon, Flipkart and Paytm rush to enter food delivery business

BENGALURU: After grocery, food delivery is emerging as the next big frontier for India’s largest ecommerce companies. Flipkart, Paytm and Amazon India are all actively exploring investments, acquisitions or expansions into the food-delivery business, a once-hot segment that soured quickly before a wave of consolidations brought about some stability.

All these Internet giants have separately held talks with the food-delivery segment leaders Zomato and Swiggy besides cloud kitchen players like Freshmenu for investments.

Flush with cash following recent fund-raisings, they also have an eye on sector-specific online retail stores as well as travel and entertainment ticketing companies, these people said. This rush for diversified investments has triggered a race of sorts among the Internet giants to evolve into larger ecommerce conglomerates.

This is similar to the one triggered in China by their local internet giants, as the Indian ecommerce companies seek to increase the frequency of transactions on their platforms.

“Amazon’s approach is more deliberate in terms of making an investment while Flipkart and Paytm are aggressively scouting for deals,” said an entrepreneur involved in some of the discussions. “The hunt is being driven by a fear of missing out or to deny an opportunity to (their rivals) rather than for a very well thought out strategy or a major business use-case.”

Flipkart along with its investor Tencent held investment discussions with Zomato before the food-delivery company entered into an exclusivity agreement with Chinese ecommerce conglomerate Alibaba’s payments affiliate Ant Financial for capital infusion.

India’s largest online retailer has now initiated discussions with Swiggy, according to two people aware of the development, for an investment of up to $100 million. Swiggy and Flipkart share South African media giant Naspers, which is also the largest shareholder in Tencent, as an investor.

Seattle-based Amazon is said to have earlier given Zomato a term-sheet for an investment at a $600-million valuation before the discussions floundered over the food-delivery company’s estimated worth. Amazon’s investment talks with Swiggy last year weren’t successful either. The global ecommerce giant, which is also looking to expand its meal kit-delivery business in India, has most recently held early talks with cloud-kitchen startup Freshmenu for an investment, according to people aware of the development.

Paytm also held discussions with Swiggy for an investment earlier this year and now its largest shareholder, Ant Financial, is in talks to invest in Zomato. The Gurgaon-based food discovery and delivery company is expected to align more closely with Paytm as a payments platform if the Ant investment goes through even though it will continue to use all other payment modes, said one of the sources mentioned above.

“Today we are at a steady state environment where online retail growth is happening at 20-30%,” said Sanjot Malhi, who leads consumer investments at Matrix Partners India. “The underlying reason is that while internet penetration is expected to grow to 500 million by 2020, the current ecommerce proposition does not appeal equally to that entire base. The top 10-20 million customers behave a lot like those living in New York or San Francisco, which is why initial growth happened very quickly.”

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