Delivery War: Catching Fire

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The latest speculation about Zomato being in talks with Grofers, for a possible acquisition, through an all-stock deal, strengthens the belief inferred in the previous article “Delivery War: Winner-Takes-All” about the fierce upcoming competition in the grocery delivery segment. Currently, Grofers valuation is around $650 Million as per ET news report, and if everything fares well, as speculated, then it will be the second big buyout by Zomato following UberEats India operations’ acquisition. If we try to evaluate the current scenario from a synergy standpoint, then from the surface level itself, both the businesses look synergistic in nature. Still, a deep dive analysis will help us to understand and visualize the picture clearly about: the level of synergy, the two businesses resonates with each other and will throw some light on the possible approaches the two might be considering for the post-acquisition integration. Looking at Zomato’s history, they have somewhat become proficient at this skill. Hence it will be more interesting to see how Grofers’ operations will be restructured if the speculated deal sees the light at the end of the tunnel. 


The above analysis advocates that “combination” is one of the most influential synergy operators in the case of Grofers and Zomato, which suggests that combined both the entities will gain market power and bargaining power relative to their suppliers. Hence, while combination and consolidation provide the much-needed economies of scale dimension to the business, some of the active attributes of connection and customization, in case of this partnership, will help it to exploit economies of scope by enabling opportunities for cross-selling.     

Impact on Grocery Delivery Market Dynamics
As our analysis suggests that a strong synergy prevails between the operations of the two businesses under discussion. Hence, the complementarity of the two will be the game changer and will force the other players like Big Basket, Amazon, Flipkart, and relatively new patron Swiggy, etc., to go back to the drawing board and formulate a new strategy to stay competitive. Thus, this might result in a possible strategic alliance formation, merger, acquisition, or least likely a JV. Though nothing can be said with certainty at this juncture about the possible competitive moves, this partnership will stimulate, except one that the firms need to be agile and flexible enough to take a more substantial step to stay in the game without eroding the value.   

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