Job cut fears as Blinkit merges backend with Zomato Hyperpure

Blinkit is expected to shut most of its own backend fulfilment warehouses and merge them with Zomato’s business-to-business restaurant supply business Hyperpure, two people aware of the matter told ET.

Earlier in March, the company had halted its business and shut many dark stores, only to open new ones so that it can keep its 10-minute delivery promise. The move was seen as an attempt by Blinkit to compete better against Mumbai-based Zepto, which at that time was aggressively promoting its 10-minute delivery promise.

This time, though, there is an air of uncertainty for employees as a number of Blinkit employees are being transferred to Zomato Hyperpure.

“There are likely to be layoffs in any M&A deal and even though the company has not said anything about layoffs, duplications are likely to emerge,” said one of the employees cited above.

The first steps towards integrating operations of Blinkit with Zomato had kicked off in January even as the food delivery platform’s controversial and protracted deal to acquire Blinkit for Rs 4,447 crore awaits a customary shareholder and stock exchange approval, expected by August.

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Vertical integration

While both companies have spoken a lot about using the same delivery fleet, the immediate priority is to integrate the backend, people cited above said.

“This helps reduce costs significantly for Blinkit as the joint entity can not only bring down the procurement costs due to economies of scale but also share resources like backend fleet and manpower,” one of them said.

Fulfilment centres are large warehouses that provide supplies to dark stores across cities and Blinkit typically has one fulfilment centre in each city.

Both sources told ET that Blinkit started integration with Hyperpure in Bengaluru and Chennai in anticipation of the deal going through in January by procuring fresh fruits and vegetables from the business-to-business vertical. As of now, integration with Hyperpure is underway or already complete in Mumbai, Jaipur, Hyderabad, Pune, Ahmedabad and Kolkata as well, they said.

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Both Blinkit and Zomato did not respond to queries sent by ET about the integration with Hyperpure and its implications till press time Sunday.

In Delhi-NCR, Blinkit’s biggest market that accounted for 30-40% of its overall sales in March, three Hyperpure fulfilment facilities are being set up which will serve the needs of both Blinkit and Zomato. It will take another 3-4 months for the transition to happen in the national capital, one of the sources said.

While Blinkit currently procures fruits and vegetables from Hyperpure, it has plans to also add perishables items like bread and dairy products to the list and testing for the same is set to start within a month, the sources said. Packaged foods and grocery will continue to be procured by Blinkit separately as they fall outside of Hyperpure’s categories.

Integration of Blinkit’s operations with Hyperpure is significant as quick commerce companies are cutting costs as the funding environment has turned bleak.

ET reported on June 7 that companies have stopped their 10-minute delivery promise and are trying various ways to cut costs like clubbing multiple orders. By vertically integrating, companies can get better margins.

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Retail and ET reported that Swiggy is also looking to buy the cash and carry business of Metro retail.

“Most of the startup players are challenged for revenue and profitability, and they are obviously being opportunistic through acquisitions,” said Ashutosh Sharma, vice president and research director at research and advisory firm Forrester. “The integration with Hyperpure is one of the ways to improve the margins for the company (Blinkit).”

Fresh start?

Other than the integration with Hyperpure, both companies are working on moving into a new office in Gurgaon in the coming months, one of the sources said.

ET had reported on February 18 that Zomato has leased 300,000 sq ft of office space at Emaar India’s Downtown Capital tower in Gurgaon in one of the biggest leasing deals in the National Capital Region (NCR) in recent times.

Blinkit and Zomato are also working on integrating their technology – both front end and back end.

“At the backend, there are devices like POS (point-of-sale) machines to scan products for inventory management, and all this runs on software developed by Blinkit, this has to be changed to the software made by Zomato,” said one of the sources quoted above.

Blinkit has always had big ambitions – it has been wanting to get into the wider ecommerce space by delivering products outside the quick commerce space. The company’s town hall is called “Apples-to-Apples” internally, indicating the company’s ambition to eventually deliver everything from apple, the fruit, to Apple products like the iPhone.

The company has had several senior-level exits in the past year, including one of the cofounders, Saurabh Kumar. He has gone on to start another company called Warpli, which has similar ambitions to Blinkit. It wants to deliver everything an ecommerce platform offers in 30-minutes. ET reported on July 11 that the company has promoted long-time executive Rishi Arora to cofounder level.

Company executives, though, said Blinkit is still far away from achieving its ‘Apples-to-Apples’ dream.