Amazon India has recently shown interest in Swiggy’s quick commerce business, Instamart, amid Swiggy’s preparation for its IPO. This move reflects a strategic interest in rapid delivery services as consumer demand rises. However, discussions face multiple complexities. Here are three compelling reasons why Amazon might consider acquiring Swiggy’s quick commerce business for $10-12 billion.
1. Market Expansion and Consumer Demand
Amazon’s interest in Swiggy Instamart is driven by the booming quick commerce sector in India. Rapid delivery services like Instamart, Zomato’s Blinkit, and Zepto have seen a significant rise in consumption. A report by Goldman Sachs in April valued Blinkit, Zomato’s quick commerce unit, at $13 billion, indicating the substantial market potential. By acquiring Instamart, Amazon can expand its footprint in this rapidly growing sector, meeting the increasing consumer demand for quick deliveries.
2. Strategic Fit with Amazon’s Operations
Amazon has been internally developing its quick commerce initiative, recognizing the potential of this market. Despite not offering such services in other global markets, Amazon sees an opportunity in India’s quick commerce sector. Acquiring Instamart would allow Amazon to leverage Swiggy’s established infrastructure, user base, and operational efficiencies. This strategic fit can enhance Amazon’s competitive edge against rivals like Flipkart, which has been actively pursuing its quick commerce strategy.
3. Enhanced Market Position and Competitive Edge
Legacy e-commerce players like Amazon and Flipkart are scouting for quick commerce assets to strengthen their market position. Swiggy’s Instamart, with its improved unit economics and expanded user base, presents an attractive acquisition target. Swiggy’s investor Prosus highlighted Instamart’s growth in its 2023 annual report, noting larger basket sizes and better operational efficiency. Acquiring Instamart can provide Amazon with a robust platform to counter the quick commerce initiatives of competitors, consolidating its market leadership in India’s e-commerce sector.
Potential Roadblocks
While the acquisition presents significant advantages, it is not without challenges. The deal’s complexity, valuation concerns, and Amazon’s typical reluctance to pick up minority stakes could hinder progress. Moreover, Swiggy’s confidential filing for a public offering and its valuation of $10-12 billion make the acquisition a costly proposition. Amazon will need to navigate these roadblocks and secure global clearance to advance discussions.
Conclusion
Amazon’s potential acquisition of Swiggy’s Instamart aligns with its strategic goals to expand in the quick commerce sector, leverage operational synergies, and enhance its market position. Despite the complexities and high costs, the acquisition could provide Amazon with a competitive edge in the rapidly growing quick commerce market, meeting rising consumer demands and strengthening its foothold in India
