Zomato has been in the hot waters after several of BlinkIt‘s delivery partners went on strike last week. The strike has garnered a lot of attention on social media and has also caught the political eye.
What Happened: BlinkIt updated its fee model for delivery partners. The company is now moving from a fixed-fee model to a hybrid pricing structure.
The company used to pay a fixed ₹50 per delivery to its partners. This was earlier slashed to ₹25, and has been further slashed to ₹15 with an added incentive based on distance traveled.
This has miffed the delivery partners who are on strike in the NCR region since last week. Several Blinkit users posted screenshots of the app saying ‘your store is under maintenance.’
Commenting on the strike, a BlinkIt spokesperson told Benzinga that only Gurgaon and Noida remain majorly affected currently and the company is working with the authorities to ensure that “riders willing to work in these areas are allowed to work safely.”
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Weighing in on the strike, ICICI Securities analyst noted that “strikes/agitations are unavoidable in the sector given the large exposure to an urban ‘blue-collared' workforce.” The analysts highlights that since the issue has already garnered political attention, the company should look to resolve it quickly.
Talking about the impact of the strike on Zomato’s finances, the analyst estimated that Blinkit was operating 370 dark stores pan-India as of third quarter. Based on this, the strike would mean that 25% of the dark stores are currently not operational.
As per the research note, given that at least three-four days' sales have already been lost, this implies a 1% loss in revenue from Blinkit.
The analyst said that the change in the delivery fee structure indicates that the food delivery giant is making efforts toward cost control.
“In our view, this would allow Blinkit to increase the delivery radius for their existing dark stores and thus improve its network coverage with limited capex spends,” ICICI Securities added in its latest research note as it maintained its ‘buy’ rating for the stock with a price target of ₹65.
Price Action: Zomato’s share price was down 1.19% to trade at ₹53.19 in the early hours of trading on Monday.
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