Amazons Rapid Delivery Push Triggers 15 Billion Rout For Eternal Swiggy

. and Walmart Inc.’s Flipkart are looking to crash it.Eternal, whose Blinkit does doorstep delivery of everything from eggs to electronics within minutes, has slipped 28% from its October all-time high as of Thursday’s close, while rival Instamart’s owner Swiggy has plunged about 47% from its recent peak in September. That adds up to a selloff of more than $15 billion (Rs 1.4 lakh crore) for the duo as investors get spooked by the onslaught of competition.Amazon and Flipkart are doubling down on India’s booming $11 billion rapid-commerce segment, building out their network of last-mile warehouses, called dark stores, to push into smaller cities. Meanwhile, Zepto Ltd. plans to raise as much as $1 billion via an initial public offering, amassing a war chest to take on market leader Blinkit and Swiggy Instamart. 132065153“The challenge right now is that the competition is really high, so near-term profitability is depressed,” Franklin Templeton fund manager Yi Ping Liao, who holds shares in Eternal, said in an interview. “The risk is the duration of the competitive intensity.”Seattle-based Amazon, which started ultra-fast deliveries last year, is making up for its delayed entry. It announced plans last week to expand the Amazon Now service to more than 300 Indian cities and towns, up from more than 15 right now, as it pledges to invest $13 billion more to build its AI and cloud infrastructure in the country.Flipkart Minutes has scaled to 1,000 dark stores to take its offering to 130 cities in less than two years, according to a report in The Economic Times. Flipkart is looking to set up 1,500 stores in 180-plus cities in the next few months, the report said.“Based on store expansion and aggressive discounts offered, we believe Amazon will take away some market share from the incumbents,” said Rashi Talwar Bhatia, chief investment officer at Ashmore Investment Management India LLP, who’s holding Swiggy shares due to their discounted valuation.Blinkit had 2,243 dark stores in the year ended March 31 while Swiggy is trailing at 1,143, according to a May 15 report by Macquarie Equity Research.Billionaire Mukesh Ambani’s conglomerate is leveraging Reliance Retail Ltd.’s vast network of brick-and-mortar stores under to push into quick commerce across categories under its JioMart platform. Its network of 3,100-plus stores serve more than 1,200 cities, Reliance shareholders were told at the annual general meeting earlier this month.‘Years, Not Quarters’“We see rising and persistent competitive intensity for years, not quarters, from multiple dimensions” such as horizontal e-commerce platforms like Amazon Now and Flipkart Minutes as well as omni-channel retail, Macquarie analysts Aditya Suresh and Baiju Joshi wrote in the May report.The brokerage slashed target prices for Eternal and Swiggy and downgraded Swiggy to Underperform. It already has an Underperform rating on Eternal.The narrowing competitive moat around the two large quick commerce incumbents has also tempered the excitement around Zepto’s listing expected next month. Set up by two Stanford dropouts in 2021, India’s 10-minute deliveries were Zepto’s brainchild in the local market to begin with.But it is coming to the local equity market just as the deep-pocketed rivals are muscling into the world’s most closely watched experiment in rapid deliveries.Zepto’s shares in the unlisted market have fallen more than 32% since February, declining to 39 rupees from 58 rupees, according to data from UnlistedZone.com.Pricing WarWhile Blinkit managed to show Ebitda-level profitability in the December quarter, Swiggy’s quick commerce operations made an annual loss of about $460 million and Zepto over $600 million.Blinkit’s chief believes it can thrive even if the sector undergoes a shakeout and Swiggy has pledged to stay out of this pricing war. Franklin’s Liao expects Blinkit’s superior unit economics and execution abilities to help weather competition.But the competition is not piping down and instead going all-in with deep discounts in a slugfest for market share. 132065135The upside is that the demand surge has decisively moved beyond the metros and into Tier 2 and Tier 3 towns, underscoring how the quick-commerce model has a pan-India appeal, Emkay analysts led by Pranav Kshatriya wrote in a June 14 report.That trend, however, doesn’t distract from the heated rivalry in the rapid delivery segment.“The sector remains in a landgrab phase, and the entry of Amazon and Flipkart will keep competition elevated,” Emkay’s report said.