Startup and VC Ecosystem Updates | Issue# 5 [August 19, 2024]
What?
Swish, a 10-minute food delivery startup, has recently emerged with the promise of quick and convenient delivery, aiming to capitalize on the growing trend of hyperlocal deliveries. Helmed by the founding members of the crypto investment platform Pillow, Aniket Shah and Ujjwal Sukheja, alongside former Polygon Labs software engineer Saran S., Swish was launched on August 4, 2024 in Bengaluru and aims to disrupt the traditional experience of ordering food by offering ultra-fast delivery. However, the path to sustainable growth and profitability is not straightforward and laden with challenges. More about Swish here.
Challenges in the 10-Minute Delivery Model
The concept of 10-minute delivery is not new, but it is fraught with logistical and sustainability challenges. Swish, like its predecessors, Zomato, Swiggy, and Zepto, must contend with issues related to inventory management, delivery logistics, and the high costs associated with maintaining a rapid delivery service. The need for densely located fulfillment centers to meet the delivery promise adds to the operational complexity and financial burden. High operational costs, coupled with the pressure to offer competitive pricing, will test Swish’s tenacity to achieve and sustain profitability, especially with scale. The company must find innovative ways to reduce costs, optimize delivery routes, and perhaps adjust its delivery times to balance speed with economic viability.
Competition and Market Dynamics
Swish enters a highly competitive market, where established players, such as Zomato, Swiggy, and Zepto have already attempted similar rapid delivery models. Zomato’s 10-minute food delivery experiment in Gurugram, Zomato Instant, for example, was plagued by low order volumes and failed to recover the fixed operational costs. The company ended up rebranding the vertical in 2023 and is said to be working on a new menu. Swiggy, too, explored the rapid delivery space through Instacafe in Bengaluru, but encountered issues with scaling the model profitably, leading to the eventual discontinuation of their service. Zepto, another player in the quick commerce space, initially showed promise with Zepto Cafe in Mumbai and an aggressive expansion strategy to go with. However, the company is yet to make progress on the same. Swish must differentiate itself from its competitors by offering unique value propositions or more efficient operations, apart from super-fast delivey.
How is it going for Swish?
Since its launch, Swish has garnered more than 5,000 downloads on the Google Play Store. The startup currently runs a cloud kitchen named Pod in Bengaluru’s HSR Layout, covering 250 sq. ft. and serving a 1.5 km radius. In its first week, the kitchen received about 150-200 daily orders, with an average order value between INR 250-300. Swish aims to expand by opening 45 more Pods in Bengaluru’s high-demand areas within the next six months, with plans to eventually grow beyond the city.
Strategy and Values
Despite the struggles of the larger companies with the 10-minute food delivery model, Swish’s cofounders are optimistic due to a shift in consumer behavior, where quick deliveries are being increasingly preferred. They tested the model with a pilot phase that confirmed sufficient demand. Leveraging their network in the food delivery industry, the cofounders kept their capital expenses low and optimized their operations to prepare and package food within 6-7 minutes. Swish’s head chef has been instrumental in developing a menu that maintains quality and taste, while ensuring safety and hygiene. The menu is also competitively priced, making it more affordable than options on other platforms.
Business Model
Swish is a vertically integrated startup that manages all of the aspects of its operations in-house, from app design to food preparation, delivery, and supply chain. The company has optimized its processes to ensure rapid deliveries, with food preparation taking 4-5 minutes, packaging 1-2 minutes, and delivery another 4-5 minutes. Swish’s business model is economically viable, particularly with order volumes exceeding 100 per day, supported by a 70% margin on food items. By maintaining a 1.5 km delivery radius, the startup keeps delivery costs low and avoids marketplace or partnership fees. Operating with a small team of 15-20 employees, Swish is iteratibely refining its operations, planning expansion in Bengaluru, and working on adding healthier menu options.
Thoughts
The likes of Swiggy, Zomato, and Zepto would have eventually cracked the 10-minute food delivery model, and if not, another startup would. We are glad that Swish is trying to be that game-changer, since this was a problem that needed to be solved. Given the changing consumer expectations, users would have wanted such a service sooner than later. Swish’s focus on starting small and capturing the market in a geographical area, and then replicating the model to expand and scale does seem to be a decent strategy.
Swish’s future, however, hinges on its ability to address the inherent challenges of the 10-minute delivery model. It is a long road ahead. To shore up revenue, the startup is working on strategic expansion and a healthier food menu. Other strategic considerations could include potentially expanding into other services, leveraging technology for better efficiency, exploring partnerships to mitigate costs, and considering variants of platform fees with scale. Once the company is able to reach scale and grab a share of the market in the urban areas, the next challenge would be expansion across the Tier 1, Tier 2 cities, and beyond – a challenging area that the market giants are yet to crack. Also, with scale, a point may come where the startup would not be able to bypass the marketplace or partnership fees, which would have to be tackled. However, the company’s long-term success will depend on its adaptability and willingness to evolve in response to market demands and operational challenges. We wish the startup well in that regard.
If you are interested to learn more, feel free to check out this coverage by Inc42.
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Acronyms used in the blog that have not been defined earlier: (a) Venture Capital (VC), (b) Square Feet (sq. ft.), (c) Kilometre (km), and (d) Indian Rupee (INR).