Zomato’s quick commerce business Blinkit saw its revenue jump 20% quarter-on-quarter to Rs 363 crore in the period ending March 31, 2023 even as its gross merchandise value increased 17% to Rs 2,040 crore.

While Blinkit’s total number of orders jumped 25% to 39.2 million quarter-on-quarter, its average order value dropped yet again to Rs 522, down from Rs 553 in the quarter ending December 31, 2022.

Blinkit founder Albinder Dhindsa said that the average order value (AOV) is a function of seasons and multiple other factors.

“We have learnt that the AOV in this business will continue to swing up and down in the near to mid-term due to multiple (mainly seasonal) factors,” he said. “ For example, AOVs will go down when there is a good harvest of vegetables (which leads to lower prices for F&V). Over time, as we get scale, we hope to be able to predict such swings better and mitigate the impact of these swings on our margins.”

Also read | Zomato Q4 Results: Cons loss narrows to Rs 188 crore, revenue surges 70% YoY

The Gurgaon-based company saw its contribution margin improve significantly, from negative 4.5% to negative 2.7% sequentially to post a contribution loss of Rs 56 crore for the quarter.

“The improvement in contribution margin was driven by both revenue and cost levers,” said Dhindsa. “On the revenue side, better ad monetisation and higher customer delivery charges partially offset the drop in revenue per order due to lower AOVs. On the cost side, higher throughput per dark store and efficiencies in replenishment (warehousing and middle mile) drove down the cost per order (operating leverage).”Zomato cofounder and CEO Deepinder Goyal said that more than 65% of the gross order value came from contribution-positive stores, but said that there is still a long way to go in terms of margin improvements.

“A few stores have even crossed 5% contribution margin and we expect that to be the case across the mature parts of our network at some point in the future,” Goyal said. “We believe we are the most cost-efficient and the largest quick commerce business in India today.”

Dhindsa said that Blinkit had a total space of 1.3 million square feet, and the throughput in the fourth quarter in terms of sales was Rs 15,000 per square foot.

“For some of our mature stores, this number is already Rs 30,000 per sqft. What makes our throughput per sqft so high? Three reasons primarily – most relevant and fast-moving assortment, store design optimised for deliveries (more storage, less aisle space, efficient order checkout), and multiple replenishment cycles in a day,” said Dhindsa.

The company’s top management confirmed reports that Blinkit is looking to enter the home service space to take on Urban Company. As a result, Goyal left the board of Urban Company. “ Since I was on the board of Urban Company, I thought it was the right thing for me to step away given we were exploring this space,” said Goyal. “If at all we end up competing with Urban Company at a large scale, we know we are up against a formidable team and a very high quality business.”

In April, Blinkit started facing protests from delivery workers against a renewed fee structure that they say will reduce their income, disrupting services at some locations. ET reported on April 25 that about 1,000 delivery executives of Blinkit in the national capital region (NCR) have joined rival quick-commerce operators like Swiggy Instamart, Zepto and BB Now.

Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox.