India’s Swiggy bets on Instamart model shift, mirroring main rival Blinkit; eyes margin boost

Swiggy’s Instamart Pivots to Inventory Model, Aiming for Profitability in India’s Fierce Quick-Commerce Market

BENGALURU, India – August 20 (Reuters) – In a strategic move poised to reshape its trajectory in India’s burgeoning quick-commerce sector, food and grocery delivery giant Swiggy has secured crucial shareholder approval to adjust its foreign ownership cap. This pivotal decision paves the way for its rapid grocery delivery arm, Instamart, to transition from a commission-based marketplace model to a potentially more lucrative inventory-led system, directly challenging market leader Blinkit.

Since its inception in August 2020, Instamart has operated under a marketplace model, earning commissions on sales within India’s robust $11.5 billion quick-commerce market. The recent shareholder approval grants Prosus-backed Swiggy the coveted status of an Indian-owned and controlled company (IOCC), a prerequisite under Indian foreign investment regulations for holding direct inventory.

Analysts believe this shift could significantly enhance Instamart’s financial performance. "The primary benefit is the advantage of bulk-buying. Secondly, they gain the ability to share valuable data analytics with their brand partners, and thirdly, wastage will be notably reduced," explained Shobit Singhal, an analyst at Anand Rathi.

A Path to Improved Margins and Greater Control

The adoption of an inventory-led model is expected to drive substantial improvements in Instamart’s margins, particularly within higher-value product categories. This strategic pivot will also afford Swiggy greater autonomy over crucial aspects like pricing strategies, product assortment, and the entire supply chain.

Swiggy has communicated that this transition could boost Instamart’s contribution margin by approximately 80 basis points. Samarth Patel, Associate Vice President at Equirus Securities, elaborated on the impact: "That translates to about 4-5 rupees per order – roughly a sixth of the 30 rupees per order it needs to reach breakeven." Instamart’s first-quarter contribution margin stood at a negative 0.2%, a notable improvement from the negative 1.8% recorded in the preceding quarter.

The success of a similar strategy can be observed with rival Blinkit, owned by Eternal. Blinkit adopted an inventory-led model last year and has since reported five consecutive quarters of overall margin improvement, achieving positive margins in the March 2026 quarter. Blinkit attributes this turnaround to direct inventory ownership, enhanced supply-chain efficiencies, and a strategic expansion into higher-margin categories such as electronics, home decor, and gourmet foods.

Swiggy, which made its public debut in 2024, is still navigating its path to profitability, having set a fiscal 2031 target to achieve positive earnings per share.

Navigating Rising Costs and Intense Competition

While the shift promises enhanced profitability, it also introduces operational challenges, primarily an increase in working capital necessary to fund direct inventory purchases and manage stock efficiently, as highlighted by brokerage firm Jefferies. Eternal also noted last month that working capital at Blinkit was "largely driven by inventory ownership."

Both Swiggy and Eternal are heavily investing in the quick-commerce segment, broadening their offerings beyond traditional groceries into higher-margin categories. This expansion fuels intense competition for consumer attention against deep-pocketed rivals like Amazon India, Walmart’s Flipkart, and Reliance.

Adding to the competitive landscape, smaller contender Zepto is reportedly seeking to raise up to $837 million in a highly anticipated public listing later this year. These platforms predominantly operate under marketplace models, which inherently limit their ability to capitalize on inventory-led products and exercise full control over pricing, especially in the fast-paced quick-commerce environment, noted Akshay D’Souza, a consumer sector consultant.

For Swiggy, achieving the status of an Indian-owned and controlled company (IOCC) is just one facet of its broader strategy for profitability, D’Souza emphasized. He added that the company must also prioritize increasing sales of premium, higher-margin goods and strategically developing its private-label portfolio to secure a sustainable and profitable future.