Blinkit vs Instamart: Chasing a moving target in quick commerce race

Instamart's GOV growth has not translated into significant margin improvements, as higher marketing and employee expenses offset gains from reduced contribution margin losses

Competition in the fast-growing quick commerce sector is heating up as Swiggy Instamart faces a tough challenge in narrowing the gap with Blinkit, which currently dominates the market.

 

In the second quarter (Q2) of 2024-25 (FY25), Instamart’s gross order value (GOV) rose by 42.1 per cent quarter-on-quarter (Q-o-Q) and 75.5 per cent year-on-year (Y-o-Y), reaching Rs 3,382 crore. Its adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) margin improved to minus 10.6 per cent, compared to minus 18.1 per cent Y-o-Y.

 

In contrast, Blinkit reported a GOV of Rs 6,132 crore for the same period, showing 5 per cent Q-o-Q and 122 per cent Y-o-Y growth, despite operating at a larger scale. Blinkit has been contribution-positive since Q2 of 2023-24, while Instamart’s contribution margin stood at minus 1.9 per cent of GOV in Q2FY25.

 

Instamart’s GOV growth has not led to sizeable margin gains, as higher marketing and employee expenses offset improvements from reduced contribution margin losses. Analysts note that while Swiggy’s dark store network is seeing improved order density, Blinkit has achieved better unit economics at a comparable scale.

 

“While incremental improvement in customer acquisition and unit economics is encouraging, Instamart still lags behind Blinkit in both growth and unit economics. At a similar scale, Blinkit achieved a minus 2.5 per cent adjusted Ebitda margin,” said Jay Gandhi, deputy vice-president of consumer discretionary at HDFC Securities.

 

Swiggy Chief Executive Officer Sriharsha Majety expects Instamart to reach contribution break-even by the third quarter of 2025-26 (October-December 2025), and adjusted Ebitda break-even by Q2 of 2026-27 (July-September 2026). As a result, Blinkit is likely to maintain its lead in profitability, despite Instamart’s improved execution. 

 

“We’ve raised our near-term GOV growth estimates for Swiggy based on Q2 results while lowering our near-term profitability estimates due to a sharp rise in indirect expenses,” analysts at JM Financial said in a note.

 

Expansion may hinder margins

 

Beyond margin improvements, both companies are scaling up operations to capture more market share.

 

Instamart, now operating in 54 cities, plans to double its store count by March next year while increasing the average size of its stores by 30-35 per cent. The company is replacing some of its older, smaller stores (2,500-2,800 square feet) with larger ones (3,500-4,500 square feet) that can house up to 20,000 stock-keeping units (SKUs).

 

It is also rolling out ‘megapods’ (8,000-10,000 square feet) in key cities, capable of housing over 50,000 SKUs. These megapods will enable deliveries in 10-30 minutes, offering a broader selection of items beyond the top 20,000 SKUs.

 

The expansion is expected to increase both the share of user spend and average order value (AOV). An increase in AOV is vital for Instamart to sustain revenue growth and improve margins.

 

As of Q2FY25, Instamart’s AOV stood at Rs 499, up 2.5 per cent sequentially, with management projecting double-digit annual growth for the foreseeable future. However, this is still lower than Blinkit’s AOV of Rs 660 for the same period. Competitors like Zepto are aiming for an AOV of Rs 550 by next month.

 

Analysts have raised concerns about Swiggy’s megapod strategy, warning that it could lead to longer delivery times.

 

“The introduction of megapods, with an extended capacity of over 50,000 SKUs, could potentially compromise the 10-minute delivery promise, a critical marker in competing against Blinkit and Zepto. Maintaining ultra-fast delivery times amidst such expansions will be a key challenge for Swiggy’s Instamart,” said analysts at Motilal Oswal Financial Services in a note.

 

The increase in capital expenditure for new stores and warehouses may also weigh on Instamart’s margins in the near term.

 

Blinkit has previously acknowledged challenges in margin expansion despite improvements in per-store profitability, largely due to heavy investments in infrastructure for store and warehouse expansion. The company plans to increase its dark store count to 2,000 by the end of 2026.

 

As competition intensifies in the quick commerce space, Instamart is adjusting its investments to stay competitive in the short term.

 

Analysts expect Swiggy’s quick commerce segment to outpace its food delivery business. Motilal Oswal projects Instamart’s order growth at 23.6 per cent annually, AOV growth at 3.2 per cent, and GOV growth at 27.6 per cent, all ahead of food delivery.

 

“We believe it is too early to decide the winners in the quick commerce race. We will monitor Swiggy’s AOV and take rates for quick commerce to gauge the success of its strategy,” analysts at Motilal Oswal noted.