Shares of Swiggy and Eternal took another hit for the second consecutive day, as investor sentiment remained shaky following reports of Rapido’s potential entry into the food delivery space. The development has triggered concerns across the market, especially for existing players like Swiggy and Zomato, who might face a serious pricing challenge from the new competitor.
On June 10, Swiggy shares dropped over 2% to trade near ₹356, while Eternal shares slipped by over 1%, settling close to ₹254. These declines come as a direct reaction to growing fears that Rapido’s pilot food delivery project in Bengaluru could shake up the current market dynamics.
Market Reacts to Competitive Pressure
Investors are worried that Rapido’s entry could trigger a price war in the already competitive food delivery space. According to multiple reports, Rapido has started onboarding restaurants in Bengaluru for its trial run. What caught everyone’s attention, however, is the aggressive commission structure the company is offering.
Rapido is reportedly charging a flat commission fee of ₹25 for orders below ₹400, and ₹50 for those above ₹400. This translates to a commission range of just 8-15%, which is significantly lower than the 15-30% range charged by industry leaders like Swiggy and Zomato.
This pricing model could put immense pressure on existing players, who have already been working on thin margins to retain users and restaurants.
Expert Take: Valuation Cut on the Cards?
Karan Taurani, Executive Vice President at Elara Capital, believes this disruption could have deeper consequences. He noted that if Rapido manages to execute its food delivery model successfully, existing giants like Swiggy and Zomato could face a valuation cut of up to 20%.
“If Rapido executes well, it will not just affect market share but also investor confidence,” said Taurani.
His warning seems to have resonated with the market, as investors responded with a sell-off in food-tech stocks, especially Swiggy and Eternal, which are seen as being directly in the line of fire.
What’s Rapido Planning?
Rapido, which is already well-known for its bike taxi and delivery services, is reportedly planning to enter the food segment with a different operational model. As per sources, the startup is:
Onboarding partner restaurants for a pilot in Bengaluru
Offering lower commissions than industry standards
Allowing menu items starting at ₹150, and
Limiting discounts to those mutually agreed with restaurants
This lean model could appeal to both restaurants and customers, especially in Tier 2 and Tier 3 cities, where price sensitivity is higher.
Concerns for Swiggy and Zomato
For Swiggy and Zomato, the concern is not just about pricing. A new competitor entering the space could mean:
Increased marketing costs to retain users
Pressure on margins due to lower pricing
Difficulty in retaining restaurant partners if Rapido’s commission structure gains traction
Investor uncertainty, which can impact fundraising and future plans
With already high operational costs, the entry of a low-cost rival like Rapido can dent profitability and create long-term challenges.
What’s Next for Investors?
The stock market is reacting swiftly to the possibility of disruption. With two straight days of declines, Swiggy and Eternal have now come under close watch. If Rapido expands quickly and maintains its low-cost model, other players might be forced to revamp their pricing strategies or risk losing significant market share.
However, it’s still early days. Rapido’s model is in a pilot phase, and execution will be key. The real test will be scaling operations while maintaining service quality, something that has proven difficult for many startups in the segment.
Final Thoughts
The latest developments in the food delivery space underline just how sensitive the market is to disruption. While Swiggy and Zomato are currently the dominant forces, Rapido’s entry could change the game—if it plays its cards right.
For now, investor sentiment remains cautious, and food delivery stocks may continue to feel the heat until there is more clarity on Rapido’s plans and progress.
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