Quick commerce startup Blinkit is struggling to keep its house in order and has introduced surge pricing as a new addition to its menu. The cash-strapped entity recently was supported by Zomato as a $75-$100 million loan to its rescue.
The SoftBank-backed firm will now charge “high demand surge fee” during peak demand hours, a first for the grocery delivery space. This move is an effort to reduce its burn rate and increase profitability. The lifeline comes when the startup has laid off employees, shuttered dark stores, and delayed some vendor payments.
Blinkit, which has been charging surge fares in the range of INR 20-50 in recent weeks, said surge charges would be applicable during peak demand in the area. The charges will be withdrawn when the market normalizes.
The surge pricing is on the lines of food aggregator apps such as Swiggy and Zomato, known to charge surge fees during inclement weather or late-night deliveries.
Blinkit giving in best efforts to keep afloat
Blinkit, which spent INR 600 crore between November and February to expand the business and acquire customers in the cash-guzzling and deep-discounted grocery delivery space, is now looking to cut costs by reducing its cash burns.
Zomato last invested $100 million in Blinkit (previously Grofers) for a 10 percent stake at a valuation of a billion dollars just before its initial public offering in July last year.
While Blinkit was supposed to raise a further $500 million from Zomato, this hasn’t materialized due to current market conditions, where new-age tech stocks have been hammered. Sources say the $100 million debt will help Blinkit tide over liquidity issues, paving the way for an eventual acquisition by Zomato.
Blinkit has also been in talks with a bunch of venture debt firms to raise money and recently signed a term sheet with Innoven Capital for debt worth $10 million, according to people familiar with the matter. The money from Innoven is expected to come in three tranches, with the company receiving a few crores last month.
Blinkit, which was on its way towards a rapid expansion, has also started witnessing a slowdown in order growth in recent months. According to sources, from 2.8 million orders in November, it reported a massive surge with over five million orders in January.
However, the two consecutive months after that have witnessed just 4 percent month-on-month growth. As of now, the company is delivering around 190,000 orders every day.
The social media debacle
The company also faced complaints on social media for promising lightning-fast grocery delivery and then for not committing to its promises many times in the last few months. Customers alleged that their orders were shown as delivered even though they didn’t get any delivery in the stipulated time.
Blinkit recently closed about 40 dark (or delivery-only) stores and is in the process of rationalizing costs. The startup has a network of more than 100 partner stores or warehouses in eight cities through which it makes 10-minute deliveries.
On an internal note, the chief executive and founder of Blinkit Albinder Dhindsa said that the company would continue to focus on growth, reducing burn rate, and improving the execution speed. Surge pricing is one step towards attaining this goal, but market experts are skeptical about the development.