Zomato’s quick commerce unit Blinkit is accelerating its expansion and expects continued losses as competition in India’s instant delivery market intensifies.

Blinkit now aims to reach 2,000 dark shops – small warehouses in residential areas that exclusively serve online orders – by December 2025, a year ahead of previous guidance, after exceeding of 1,000 stores at the end of the December quarter (beating its own projection by one quarter).

This acceleration led to a loss of 103 crore rupees ($11.9 million) in Q3FY25, as Blinkit added 368 stores and 1.3 million square feet of warehouse space in the last two quarters.

JPMorgan believes the industry has entered a “land grab mode,” with companies pursuing aggressive strategies around store leases, product discounts and loyalty programs. The bank wrote in a note that some other major players – including Zepto, the No.2 player in quick commerce – are expanding their dark store networks “sharply ahead” of schedule too.

Quick delivery companies – which deliver groceries and other products to customers within 10 to 15 minutes – are cannibalizing share of the Indian e-commerce marketforcing established players to overhaul supply chains in response to shifting consumer needs.

“As we continue to expand stores, our networks may carry a large number of underutilized stores that will impact our bottom line in the next quarter or two,” said Akshant Goyal, CEO. who is the finance officer of Zomato. These investments, he added, are likely to result in growth that will remain “significantly above 100%” through FY25 and FY26.

The strategic shift comes amid intensifying competition. Zepto, backed by Lightspeed, StrepStone and Glade Brook, raised over $1 billion last year. Zomato also raised $1 billion in November last year through a qualified institutional placement.

Flipkart too launched his rapid commerce offered last year and added more than 100 dark stores. Amazon the quick commercial pilot began in the South Asian market last month. And Swiggy, which runs India’s No.3 instant commerce platform, listed late last year on what 2024 is the biggest tech IPO in the world.

“The biggest impact of the intensifying competition is the acceleration of customer awareness and adoption of quick commerce,” said Albinder Dhindsa, who leads Blinkit. He compared it to the early days of food delivery, when increased competition led to higher investment in customer acquisition across the industry.

While Blinkit’s core customers remain loyal – making up a third of the platform’s gross order value in December – the company says competitive pressure has led to a halt in margin expansion. The company expects the current investments in the store network to eventually yield strong returns once the business achieves greater scale.

The expansion comes as Zomato’s core food delivery business showed sluggish growth of 17% year-on-year in the most recent quarter, compared to rapid commercial growth of 120%.