SWIGGY

Instamart's Post-Expansion Challenges

Instamart, the quick-commerce arm of

, is facing significant headwinds after a year of aggressive expansion. The company's orders per dark store per day have fallen by 22% over the past nine months, from a peak of 1,260 to 985. This suggests a more profound issue of structural overcapacity rather than just operational teething troubles. This dip in productivity comes after a massive expansion that saw its dark store count grow to 1,021 stores, ballooning warehouse space by 2.6 times. The productivity of Instamart's dark stores, measured by Gross Order Value (GOV) per square foot, has also dropped. After peaking at ₹17,359 in the September quarter, it fell 32% to ₹11,762 by the March quarter. Though it saw a 12% rebound in Q1, it's still 24% below its peak. The company posted a loss of ₹896 crore in Q1, forcing it to pause its expansion efforts to focus on boosting store utilization. To address these challenges, Instamart is shifting its strategy towards larger formats. The company has added 44 "megapods" of 10,000-12,000 sq. ft, which account for 10% of its total dark-store area and serve 25% of its customer base. These larger stores offer a wider assortment of up to 50,000 Stock Keeping Units (SKUs), which could potentially increase the average order value. However, this strategy carries the risk of higher rent and staffing costs, and its success hinges on sustained consumer adoption of larger carts, a challenge other players have faced. This period of pause for Instamart is an opportunity for its rival Blinkit of to further widen its lead. Blinkit is in a growth phase and plans to reach 2,000 stores by December. Instamart is now playing catch-up, opening dark stores in high-density areas where Blinkit or Zepto are already present. Winning over customers will be the next, more difficult step, as analysts note that Blinkit already holds a strong edge in customer loyalty and retention.