Ladies and gentlemen, a very good evening, and Welcome to the Zomato Limited's Q2 FY20 25 Earnings Conference Call. From Zomato's management team, we have with us today Deepinder Goyal, Founder and CEO; Akshant Goyal, Chief Financial Officer; Albinder Dhindsa, Founder; and Kunal Swarup, Head of Corporate Development. Before we begin, a few quick announcements for the attendees. Anything said on this call, which reflects outlook for the future or which could be construed as a forward-looking statement, may involve risks and uncertainties. Such statements or comments are not guarantees of future performance, and actual results may differ from those statements. Additionally, please note that this earnings call is scheduled for a duration of 45 minutes, and we will be starting directly with the Q&A section of the call. If you wish to ask a question, please use the Raise Hand feature available on your Zoom dashboard.
We will announce your name on the call and unmute your line, post which you can proceed with your question. We will wait for a minute while the question queue assembles. The first question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi, team. Good evening. My first question is on the quick commerce competition. You know, you have addressed some parts of this in the, in the letter, but how do you think about the next few quarters, given that, you know, given that there is a capital raise, you know, you are doing, everybody, you know, your peers are also doing? On top of that, you know, Flipkart Instamart has entered, and in general, I think the delivery timelines are generally, you know, going down with delivery companies also talking about, you know, participating in this entire QC bit, one way or the other. So what is your outlook from a next, uh, let's say, two-to-four quarter perspective?
Yeah. Hi, Vivek, Akshant this side. Thanks for your question. So look, I think we are focused on our own business, you know, because, competition, yes, is increasing, the business is also evolving. It's still a nascent business, and there are still parts of business which are not fully built out yet, where we need to problem solve. We're also expanding categories and assortment. So I think there's a lot of work to be done here at our end, and we're just focused on that. We, of course, have to watch competition and make sure, I mean, take cognizance of that and take some decisions accordingly.
But largely, I think it's there's no point in us trying to predict what will happen from a competitive standpoint because it's sort of everything is fairly new at this point and a lot of things are not in our control. So we just, like, focused on our own business at this point.
Got it. And Akshant, a follow-up to that, s o what are the key things that you are monitoring? So when you are saying, you know, you have written at one of the places that it's the service level which, you know, which is important, and. But let's say to the funnel, if hundred new customers are joining the, you know, the QC platforms, how do you ensure. So are you monitoring of the incremental customers you are getting a fair share? Or basically, the question is that at what point you will say that if there is too much of, you know, discounting freebies one way or the other, you will have to, let's say, participate or retaliate in some ways.
What are those parameters that you're monitoring before, which gives you confidence not to go all out today and may change your mind if it goes out of control, so to speak?
So I think we are less focused on market share at this point because the business for us is growing more than 120%-130% year-on-year, right? And that's the capacity that we have in terms of how much business can we service sustainably, profitably, and at good service levels, right? So beyond that, you know, how many incremental users are coming to the category, and therefore, what share of that are we getting is sort of a moot point in our case. Because I think our business is operating at full capacity in terms of expansion and in terms of the number of customers that we can service, and that is evident in the growth numbers that you see even for the last quarter, right, despite the heightened competition.
Got it. Got it. Akshant, in terms of the, and th is is my, you know, second and last question. In terms of new store additions, can you highlight how much of those will be, let's say, non-NCR versus NCR?
Yeah. So, I think, if you look at sequentially, the share of Delhi NCR in business, in our business, continues to fall. We had given this data a couple of quarters ago when we had said that the share was around 47%. Today, that number is less than 40%. So, suffice it to say that I think, as we're focusing on now building out markets beyond Delhi NCR, which was the focus for the first few quarters in our business, we are seeing a growth in other cities. And, today, by GOV, we believe we are the largest player in all the major metros outside of Chennai and Hyderabad, right? So that just shows that the focus is paying off in terms of growth of the business, even in the non-Delhi markets.
Interesting. And just a follow-up to that, Akshant. The narrative always has... or let's say, I mean, it's a relatively new business, but for last few quarters, the narrative was, as you get into, you know, non-NCR, cities, let's say, except Mumbai, probably, your AOVs will actually start to shrink. But the reality is your AOVs are still moving up. So, NCR and non-NCR, is it fair to say that, you know, all the cities are ballpark in the same AOVs, or it's like Delhi, Mumbai, significantly ahead of the other towns or and cities?
So if you look at the top seven, eight cities, the AOV are similar, actually fairly similar. In fact, there could be one or two markets outside of Delhi where the AOV is higher than Delhi. So what you mentioned about AOV being lower in other markets, at least we don't see that in our business.
Very, very interesting. Thank you, Akshant, and wish you all the best.
Thank you.
Thank you. Next question is from the line of Aditya Soman from CLSA. Please go ahead.
Hi, good evening. Two questions. Firstly, adding on to the question before on newer markets, can you give us a sense, I mean, obviously we see that now, Blinkit's available in over 40 markets. So one, how many markets do you see yourself getting into? And second, how much would the top, let's say, five or 10 cities contribute to your overall GOV in the near term, and maybe what you see over the next year or so? And the second question is on CapEx, which you indicated has been about INR 214 crores. Can you give us a sense of where this is being spent? Because this has gone up, and this has also led to sort of an increase in depreciation. So maybe any color on that will be useful. Thanks.
Yeah. Hi, Aditya. So I think, while in terms of, yeah, our presence in new cities, we've sort of launched a bunch of cities in the last quarter. I think what we're trying to test with that expansion is, one, in how many cities, towns is this product or business viable? And the second question is, like, within a town, like, how much depth does it have, right? So it's one thing to open one store in a market, and for the sake of, like, the number of cities, that count goes up. But the second question to be addressed is, okay, this particular city or location, how many stores can we open and run the business profitably, right?
So, therefore, the city count is, may not be the right indicator of the depth of this market at this point outside of the top eight, because opening just one store in one city means we have launched the city, but we are still scratching the surface in terms of addressable market in that city, and that's the hypothesis right now. We'll have to test that. So I think our focus remains, the top eight cities, but we also want to, at the same time, make sure we are venturing into newer markets with different demographics and seeing whether this model works or not.
So while we have seen success in most of the markets that we've gone into so far, but our immediate focus in terms of building out the infrastructure and business remains in the top eight cities, because we still believe that is underserved from a supply standpoint. And it's sort of lower-hanging fruit in terms of the opportunity there before we really start building deeply into the smaller cities. On your question on CapEx, I think a bulk of that was spent on the store expansion that we have laid out in the letter. So in addition to the 152 stores that we opened, we also added seven new warehouses, right? And I think a large part of the CapEx increase you see is on account of that expansion.
Thanks, Akshant. And maybe just quickly on that first point. So, for a new city, would you just measure that again in the same way, orders per store or GOV per day per store? And can you give us a sense if those cities have been reasonable, so they would be hitting the same GOV or orders per store, is it?
Yeah, so that's also a function of, like, what kind of assortment we are able to launch a store within a city. So we definitely look at the absolute scale, but I think equally important is the ramp up on how the store performs in the first seven days, 10 days, 20 days, right? Given the kind of assortment we launch within a particular city, right? So it's a combination of that. And yes, so far, as I said, that's pretty much in every city or every new neighborhood we've gone, we haven't really been surprised. I mean, we've been positively surprised with the takeoff in that market.
Fair enough, and lastly, on the CapEx and the warehouse and new stores, so these new stores, majority of these would be franchised, right?
It's a combination of franchisee and our own store, like in the past. So we continue to sort of make sure we'd, you know, we. Our priority is a franchisee store, but when it's not available, a franchisee partner is not available, then we have to go ahead and open our own store.
Understand. And this cost will come before contribution or below? So warehouse cost will also come before contribution or between contribution and EBITDA, so it will come before contribution, right?
That's right. It's above the contribution line item, so everything is captured there. So one of the reasons the margin there is a drag, which we've also explained in the letter, is because when you open these new stores, you incur the fixed cost, but it takes a while before you can actually make the store operational, right? So that fixed cost, whether it is the cost of people in the store, or whether it is cost of rentals and so on, all of that is captured above contribution in our definition. So that is why you... we've not seen any contribution margin expansion in the last two or three quarters, largely because of the expansion that we are doing.
No, that's very clear. Thanks, Akshant. Thank you.
Thank you. Next question is from the line of Manish Adukia from Goldman. Please go ahead.
Yes. Hi, good evening. Thank you so much for taking my questions. I have two questions. Firstly, I think on the quick commerce business, your AOV has been going up, but take rate has been somewhat flattish. Is that due to non-grocery mix continuing to improve quarter-on-quarter, which probably has high AOV, but lower take rate. And a related question to that, I mean, if you were to look at, let's say, the e-commerce market in India, which is, like, $50 billion plus, where you have, let's say, smartphones, electronics, and fashion being the largest categories, maybe also beauty, where do you see the most room for, let's say, Blinkit to be able to capture a sizable market share, and where are you seeing the most amount of traction? That's my first question. I'll come back with the second one.
Hi, Manish. Albinder here. So on the take rate, I think majority of the impact that you're seeing is because of the higher velocity of new store openings. So when we open a new stores, typically, like, that takes time to ramp up, so the take rates increase over time. So the mix of new stores is increasing, that's why you see a little bit of decrease in the overall take rates.
Right, and- [crosstalk] Sorry, go ahead.
In terms of categories, I think so far, you know, the categories we launched over the last year, beauty, electronics, toys, all of these are still growing categories. We are still learning in which all use cases within these categories we have further room to grow. So, you know, I think that is becoming more and more clear as we do more and more in these categories. So as of now, we are focusing on building out both the infrastructure, the back end, and the customer experience across all of these categories.
Thanks, Albinder. And as you offer more category, I think last shareholder letter, you had 20,000+ SKUs that I think you're potentially offering in a particular area. So will you look to open larger dark stores to serve the same vicinity? Or will you have, let's say, a network of dark stores which are storing different categories to serve the same consumer? How are you thinking about that?
I think so far our strategy is still the same. We always open the largest dark stores possible that we've done from day one, and our strategy is still to continue in the same direction.
Right, and just last question on this point, Albinder. I think last quarter you had mentioned that despite all these store openings, you expect throughput per store to remain stable, which has been in the September quarter, but that is also the expectation going forward, that despite all this store rollout, you're not expecting any negative impact on store throughput.
Yeah. So I think that stays.
Okay, perfect. Second set of questions, just on the capital, where you've called out that there is less competition, and so they are raising capital, so you're also you've also looked to raise capital. So, one question, how did you decide the $1 billion number? Like, I mean, is there any math behind why $1 billion? And maybe, like, a second question there: Over a period of time, are you looking to, you know, potentially own inventory that you have in the dark stores, and how does that impact either working capital or margins? That's it from my end. Thank you.
Yeah, Manish. So, you know, the board has passed an enabling resolution right now to raise up to $1 billion, right? So this is of also subject to shareholder approval, and the actual fundraise size will be dependent on the demand market conditions at that point. So we'll see what is right for the business at that time, and what, how the market conditions are. So we sort of still open on size. And on your second question on owning inventory, I think there are pros and cons of different business models. We think our current marketplace business model works well for now. It helps our sellers, it helps our customers, right?
But having said that, we'll continue evaluating different options that are available to us from time to time, especially given that this whole entire industry and the business is new, as I said earlier, right? So as the business matures, things might keep changing, and we'll continue revisiting that. But at this point, there is no plan to move away from the business model that we have at this point.
Right. And actually, just to confirm, in your current shareholding structure, as of today, you are... you cannot own inventory. Is that understanding correct?
Right.
Okay. Thank you for clarifying.
Thank you. And next question is from the line of Sudheer Guntupalli from Kotak AMC. Please go ahead.
Hey. Hi, team. Congrats on a good set of numbers. My first question is, so there's a lot of noise around, in general, economic and consumption slowdown. So how do you see this impacting your food delivery, which is, you know, generally perceived as more discretionary compared to your Blinkit?
Yeah. Hi, Sudheer, so I think so far we haven't seen much of, I mean, I would say so far we haven't seen any impact which is sort of noticeable in our business, at least. We are watching it because we are aware that some other businesses are reporting it, but as you see, even in the last quarter, the business has grown reasonably well, despite adverse weather conditions, so it could have been the growth could have been much better without that, and even in the current quarter, you know, we are on track in terms of what our plan was, right, so there's no visible sign of any slowdown, at least in our business at this point.
Got it, Akshant. And the second question is, see, with this fundraise and also the, funds being raised by competition, is it fair to assume that the discounting aggression in the industry in general will increase, or do you have any intentions to start, you know, increasing the aggression in terms of discounts?
I don't think those two things are linked. I think, I mean, if we have to do that, we have enough cash in the bank to do that. And so I would like to say there's no plan. I mean, we're not raising money to start discounting more. I think we have to do what is right for the business first, and we don't think therefore discounting is going to help our business at this point in time.
Fair enough, Akshant.
Therefore, it's purely to strengthen our balance sheet up and nothing else.
Okay. And if I understand your prior response, clearly, you are saying this is just an enabling resolution, and size and all you guys have not decided yet. Is that a correct understanding?
Yes. I mean, the size, the cap on the size is an indication of sort of the ballpark range where we want to be. But yes, I mean, shareholder approval is pending, and we have to have a sense of the market conditions at the time of the QIP launch. So we'll take that into account and tweak the size if needed.
Fair enough. Just one bookkeeping question. So you have a tax liability during, or a tax expense during the quarter. So our understanding is some amount of carry forward losses will help. So is that completely exhausted, or we have become a fully tax-paying company now? How to think of that, the ETR item?
Yeah, so I think this is tax now on the treasury income, because we've run out of unabsorbed depreciation. So we have to pay tax on the treasury income. As far as the profit from the operations is concerned, those are still getting set off with the carry forward losses, and I think that will continue for a while. I think we'll have a couple of years before we have to pay tax on the operating income for the business. So this tax expense that you see is purely on the treasury income.
Fair enough.
And we- [crosstalk]
Thank you so much, and all the best.
I have given a note on an Exhibit B, just to explain that, in case you want to refer to that also.
Okay, fair enough, I'll refer to that. Thank you so much. All the best.
Thank you. Next question is from the line of Abhishek Banerjee from ICICI Securities. Please go ahead.
Yeah, hi. Again, congratulations on a great set of numbers. Quickly on quick commerce, your AOV has again gone up to INR 660, right? So, if you could help us understand whether there is any seasonality to this upward move, and how should one kind of think about this going ahead?
Yeah, Abhishek. So the seasonality in the AOV, this is actually more related to the rains. So during rains, our capacities do get cleansed a little bit, so we tend to see slightly higher average order values during that time. So that that helps the overall AOV increase. And the other significant factor here is just we've been increasing our range steadily, so the number of use cases on the app has gone up. Especially in non-Delhi markets, we've increased our overall assortment, so that also helps our AOV.
Got it. And one more question on quick commerce, which is, from what I understand, you used to have a pretty healthy proportion of customer charges, which you got. And from what I remember, you used to charge for delivery, even for orders above 200 , 300 . Of late, we are seeing a lot of instances where you are saying you're lowering the threshold to INR 200 . So, if you could just explain the thought process behind that.
For a very long time, our threshold has been INR 200 , like, where above which the delivery charges drop. Only in cases where we open up new stores in particular localities, during the early stages of the store do we offer free delivery above that amount or even, or at nominal amount in the early stages of the store. So that's what you must be seeing.
Understood. So, earlier it used to be that, when a new user also came in, you used to give it for a few months, but for new stores also, you do the same thing, basically?
Yeah, because mostly if you are opening a new store, especially in a non-serviceable, previously non-serviceable area, those customers do tend to be new to the platform.
Understood. Understood. That's very helpful. Thank you so much.
Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question. My first question is on AOVs for Blinkit. How should we think about it more on a structural basis as you are adding more and more categories and assortment? Is it fair to believe that structurally, this AOV number can actually inch up quite a bit?
I think for the way that quick commerce works is that, you know, the primary customers are using it for urgent use cases. Even in categories which have slightly higher AOVs, we don't see that much of an upward increment in terms of AOVs for even those use cases, because customers are not making really high involvement purchases on the platform. I think this will continue to be the majority. While we think that there would be AOV goodness because of the, you know, proliferation of new categories and more customers buying in new categories, but we don't think that it'll materially change, like, it'll dramatically change from the current levels.
Got it. Second question is on SKUs. How to think about what was the limiting factor on SKUs? Like, can it go to, like, 30,000, 40,000 SKUs, from a medium-term perspective, what would be the limiting factor? And also, you know, related question, like, is selection no longer important for consumer from a buying behavior perspective? Like, even on constrained selection, delivery timeline is becoming more important, and hence, quick commerce is gaining traction. What is your sense on that?
I think, Gaurav, the customer behavior around selection is very, very subject to which category of buying we are talking about. So for example, if you're talking about beauty, that customers would want a larger selection to be able to make a purchase. But the same might not be true for some other categories. So the overall SKU count for us goes up when we decide to launch categories. So when we launch categories which have- ... which, where the natural customer buying behavior is reliant on the presence of a number of SKUs, we will add that. So to answer your first question, we will keep seeing the increase in the selection available to customers for the foreseeable future, because we are adding categories that require a high selection for customers to be able to order within the use cases, obviously, that we are serving.
At this juncture, you don't think there is a limiting factor in your mind that, you know, at least in the mini SKUs, the model caps out because it either compromises on the delivery timeline or compromises on something else?
We think of it as a problem to solve, not as a limiting factor.
Okay. And last question is on what kind of investment one should think about from a transition point of view, in the going out segment, for your new app to from the existing app?
Gaurav, at this point, honestly, we don't know the answer because we are about to launch the new app in the next few weeks, and we'll have to respond to the situation in terms of, you know, how customers are transitioning from the platforms to the new app. You know, we are not in a hurry to actually transition every customer from the existing Zomato and Paytm platforms to the District app. So there is no pressing need, therefore, to do it in one shot, or spend inordinately more than what we need to. So I think we'll be able to, we'll be in a better position to talk about this maybe in the next quarter, once we have some data points with us.
All right. Thank you, and all the best.
Thank you.
Thank you. Next question is from the line of Divya Jain. Please go ahead. Divya, can you hear us? It seems like we are unable to connect to Ms. Divya. We'll move on to our next speaker. Next question is from the line of Bhavik Mehta from JP Morgan. Please go ahead.
Hey. Hi, it is Ankur from JP Morgan. So just first question is on the food delivery business. Can you elaborate? You know, there's been some sort of moderation on take rates. If there was any seasonality there, what happened there? And secondly, sticking to the food delivery, you know, we've seen in the quarter some experiments on the ten-minute delivery model by one of your peers. I know you, you've been experimenting with a version of that, too. What's the current thought process of the team? Is there adequate evidence for product market fit in such a delivery model?
Yeah. Hi, Ankur, so I think the take rate is just a fluctuation. And you're right, I think seasonality has a role to play there. It's also, like, mix changes between quarter to quarter, in terms of the kind of restaurants people order from, and different kind of restaurants could be at different take rates. So I think it just, I would not read too much into that beyond seasonality. On your second question, yeah, I mean, we've been, I mean, like, in any case, even in the Eternal business, we're focused on reducing the delivery times, increase restaurant availability, making sure customers have enough choices, closer to them so that the delivery time reduces because the food travels fresher, hotter and we have seen in the past that that drives more consumption on our platform.
So directionally, I think, we are focused on bringing down the delivery times. You know, but how do we get there? I think there are sort of various ways we are trying that, to do that. And I think it's too early to talk about, you know, any one particular answer where we see a strong product market fit. But I think we'll continue to experiment and, maybe share more in future once we have, better answers.
Okay, thank you. Moving to quick commerce then. You know, you mentioned investments in the business. I know you mentioned also your new stores and warehouse openings, but is there more to it? Are you also investing anything into changing your existing store profile? Especially, I think, I know Albinder mentioned that you want to open the biggest store possible. So when you try and do that, and your category makes your assortment looks very different now versus what it was maybe when many of these stores were opened, how much of this is going into refurbishing existing store footprint, beefing up the quality of supply chain to make it, you know, more resilient to the changing nature of the category mix you have?
So, Ankur, I think, you know, even in the past two years, where the business has been around, all of this has happened, right? So in our case, the store design we started from the business with, I think it's not there anymore. So everything has evolved. Size of stores has pretty much remained constant because of the real constraint in terms of, the amount of space available within the cities that we are operating in, right? But outside of that, how does the store look and feel? How is it stacked up in terms of rank, racks? What are the kind of products and categories we are servicing and storing in those stores? How is replenishment happening at the stores? I think all of that has evolved meaningfully, and I think will continue to evolve.
Yes, all of this has an impact on the profitability of the business, right? As we build, we have to make sure that we invest in upgrading this entire infrastructure as we learn new things. Over time, as that learning curve becomes less steep, we will see the profitability improve as a result of that.
Okay. Just maybe one, s orry, you were saying?
No, go ahead.
No, I was gonna ask, you know, in terms of in quick commerce, also sort of continuing, as we potentially look at addition of more and more, you know, going deeper into electronics and appliances, and I know you guys have launched returns as well. You know, if you sort of play this out over the next two or three years, and sort of this becomes a big, bigger part of your GOV mix, how should we think this impacts take rate and overall contribution margins?
I think very hard. I mean, it's like crystal ball gazing right now, but I think directionally the guidance we've given on margins is that we believe this business can get to 4%-5% EBITDA margins. I think with every passing quarter, that seems more and more realistic and achievable to us, is what I would say.
Okay, last question on the, you know, on the capital raise. I know you've given a detailed answer in the report, but I wanted to ask you, you know, beyond just the, the fact that you want, you know, you want to keep a level playing field, how does this potentially expand your strategic options? You know, you will, if you, for example, are able to raise a lot more capital, you're already probably the most profitable company in commerce doing, you know, working in India right now, and your, you know, relative, cash position will be probably among the strongest there. So from a strategic perspective, are there things you can do which your competitors in the space cannot?
I don't think so. There's anything like that at this point, and we're thinking of that. I think what we have seen is that in the past, a strong balance sheet has helped us build the business the right way, and I think the industry has responded well to that, and we hope sort of we are able to build out the quick commerce business also in the same way in the next two, three years without using this cash.
Okay, appreciate it. Thank you.
Thank you. Next question is from the line of Vijit Jain from Citigroup. Please go ahead.
Yeah. Hi. Thank you. So my question is on quick commerce. Overall in quick commerce, you know, has the audience overlap with the food delivery business in Zomato, the overlap with the audience in that, increased, you would say, over the last, say, three to four quarters as quick commerce has expanded meaningfully? And, a related question to that would be, you know, do new categories and SKUs actually bring in new kind of audience into quick commerce?
Yeah, Vijit, actually, the overlap is decreasing with time because we are seeing that quick commerce is appealing to a much wider demographic than food delivery. So while in terms of absolute MTUs, quick commerce is still small, but that's just because the reach and the audience it's reaching out to is much smaller, given that- [crosstalk] The footprint is smaller, right? But like to like, I think same neighborhoods, we see that the overlap is reducing with time because, you know, it's a broader demographic that quick commerce is appealing to.
Got it. Yeah, sure. And, would you say, you know, so the new categories bring in new customers, but, is the GMV makes also skewed towards, say, the top 500, 1,000 SKUs disproportionately, just like, you know, for example, in terms of cities, it's right now skewed more towards Delhi NCR. Is that the same case with top 500, 1,000 SKUs as well, would you say?
Vijit, there is always a Pareto in every business, so there exists one here. Not commenting on the number of SKUs, but yes, I mean, there are leading categories, and it's also a function of how mature a particular store is, right? I think eventually when you start off, the assortment is not as wide as you will see in a more mature store because the audience graduates to buying more stuff over time. So therefore, there's not a generic answer. I mean, specifically, it may vary from store to store, but generally speaking, yes, there's a Pareto in the business as well.
Got it. And my last question is, so, you know, I mean, you're, you've covered the AOV increase in quite a detail in previous questions, but, when you look at your older cohorts of customers, right, do you see the quick commerce GOV per month still rising there? And, you know, related to that, in Delhi NCR, when you acquire new customers today, are they coming in at comparable AOVs as existing customers, even in Delhi NCR?
Yeah, yeah. Answer to both that question is yes.
Okay. Got it. Great. Thank you so much. Yeah, those were my two questions.
Thank you.
Thank you. Next question is from the line of Sachin Salgaonkar from Bank of America. Please go ahead.
Hi, thanks for the opportunity. First question is on District, your going-o ut business. I wanted to understand what all use cases come under it. Is it ticketing experience? And should we also consider travel, like a traditional OTA business also?
So, Sachin, at this point, the plan is to just transition the dining out business, which we've been running for the last two years, and the new ticketing business that we acquired to the District app. Right. So I think for the foreseeable future, the focus will be to continue to build in these categories, and then, yeah, over time, we'll see if it makes sense to add more categories to it.
Okay, makes sense. Thank you. Second question, just wanted to understand on the fundraise, anything has changed for you as compared to last few quarters in terms of expansion strategy, i.e., you know, whenever you get this QIP approved, should we see a faster rollout of the 2,000 stores which you had indicated earlier? Or could we see opening of stores which could be way higher than 2,000?
No, no change in, I think, strategy or, guidance we've given on these things. If there is, we'll communicate that. I don't, a s I mentioned, I don't think, the fundraise will dictate or influence how we run the business at this point.
Got it. And last question, just wanted to understand on the TAM on quick commerce. Clearly, when you started, the thought process was it could cater to a high end of India. But over a period of time, you have scale, you have a bargaining power with FMCG companies, and in that process, the price points of SKUs do come out there. So on the back of it, do you see an expansion on TAM in a meaningful manner, which could be well beyond, let's say, the top 30-odd million households?
We don't know, so, Sachin, I think that's what we're trying to discover by getting into new cities, right? I mean, theoretically, it does look like, yes, I mean, the data that we have seen so far, as I said, it's appealing to wider demographics. So as a result, at this point, we do feel that it's definitely a much broader TAM than just the top seven, eight cities. And I think we'll know more as we get into smaller cities and build more conviction around this over time.
Got it. My last question, both of your competitors on quick commerce do have some kind of a loyalty program. Any thoughts in terms of having a loyalty program?
Not at this point.
Okay. Thank you. All the best.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time, we will now take the last few questions. The next question is from the line of Swapnil Potdukhe from JM Financial. Please go ahead.
Hi, thanks for the opportunity. So the first question is on fixed costs. So what I've noticed is, like, your fixed costs in both delivery business and quick commerce business have been rising quarter-on-quarter meaningfully. Yeah, I understand that this quarter wage hikes could be one of the reasons, and there seems to be some ad spend increase also. But and this increase we have noticed for last two, three quarters, so any on this end?
Yeah. So I think the fixed cost tier below contribution has few elements. There is marketing cost, there is server cost, there's people cost, there is infrastructure cost. So quick commerce, dining out, Hyperpure, they're high growth businesses right now. So I think some of that increase you see is because of that.
In the food delivery side, because I would have presumed that that would be more stable, but still there is a decent increase.
Yeah. I mean, food delivery, the marketing spends vary quarter to quarter, right? And therefore, it's sort of, it's not really a fixed cost in terms of people and rental and infrastructure. I think that cost is pretty stable right now. But we, the marketing cost does go up depending on the plan for that quarter, and that's why you see the fixed cost going up slightly.
Got it, and the second question, again, on food delivery, is with respect to, y ou mentioned your ambition of 30%, you know, sustainable growth in this, you know, in the near term at least. Whereas we are currently at 21%, I mean, there's quite a bit of a distance from 30%, right? I mean, any changes in our business model, any new things that we want to try out to ensure that we move towards our ambitious ambitions?
No, so this, I don't know where this 30% is coming from. We've never, we've always spoken about, 20% + GOV growth as guidance on a sort of a CAGR basis over the next few years, right? So I don't think we expected ever that we, the business is likely to grow at 30% in the near term. I think that's, like, a misunderstanding.
Okay. On the quick commerce side, just to understand if our AOVs are sustainable, would it be possible for you to share the SKUs per order? Typically, how much do we have, and how have they moved, given that we have been adding categories and there could be some high weight categories getting added? And does that play a role, just to get some sense on that?
That's too much data. We surely will not be able to share this detail.
Okay. Okay, and just last one. So now I know this is too early to ask, but still, I would go ahead and would want to understand your stores in your lower tier cities, where you are venturing out right now, how would the, you know, metrics, operating metrics be different in those stores versus your tier one cities, let's say, on AOVs, SKUs per store, store size, you know, rental differences or delivery costs? If you can just give a broad understanding of how different those things are in lower tier cities.
Again, I think, Swapnil, we do not want to share this information. I mean, these are all competitively sensitive things, and, the business in the tier two markets is still young, and we are still learning. So I think at the right time, we'll talk about it through our shareholder letter, but don't want to give these details at this point. Sorry about that.
Okay. Got it, sir. So thanks a lot.
Thank you for your questions, and all the best.
Thank you. Next question is from the line of Nikhil Choudhary from Nuvama Capital. Please go ahead.
Hey, hi. Thanks for the opportunity. My first question is on Dark Store addition. We have seen quite a bit of ramp up in the last two quarters, and if we maintain the current quarter run rate of 150 Dark Store addition, we'll more or less overshoot our initial target of 1,000 Dark Store addition by end of FY 2025, and even we'll achieve our medium target of 2,000 addition by December 2026. So is it fair to assume that we will like to keep the current run rate, or is there an immediate plan to even take it higher from the current level?
So hi, Nikhil. So I think, like, you know, this expansion could be lumpy because we don't control the entire process of opening a store. There's a lot of dependency on external bodies, licenses, and so on, right? So please don't expect this to be linear. You know, having said that, broadly, yes, we think we are on track on achieving the 1,000 stores by March 2025 and 2,000 stores by December 2026 guidance that we had given. We think we are on track on that. But it, you know, there could be sort of ups and downs along the way, given how the process is, as far as opening a new store is concerned.
Sure. My second one is on private label. We don't have any private label on Blinkit, while some of the peers have launched and with e-commerce player basically launching their quick commerce venture, they are bringing their private label on quick commerce as well. So any plan to increase the contribution or maybe venture into private label, which could, you know, also help in the contribution margin going ahead?
Not considering at this point, Nikhil, but we'll continue to evaluate.
Sure. That's it from my side. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will now conclude this conference call. Thank you for joining us, and you may now disconnect your lines.