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For bet365 bonus code 2018’s online food delivery giants Swiggy and Zomato, the Covid-19 lockdowns were the ultimate moment of truth. They presented a growth opportunity like never before. People were locked in their homes for months, discretionary spending on food services was at its highest, existing restaurants flocked to their platforms en masse, and new cloud kitchens mushroomed. Consequently, average order values (AOVs) peaked and order numbers shot up to record levels. Yet, improvement in operating margins remained elusive and the writing on the wall became glaringly clear—there isn’t much money to be made on pure-play food delivery business in bet365 bonus code 2018. But why is it so?
In food delivery, profitability means improving AOV and optimising delivery cost. The average order value of $5 for food delivery in bet365 bonus code 2018 is approximately six times lower than that of peers in the US and Europe, according to a report by global stock investing platform Stockal. Even with one of the highest commission rates in the world that go as high as 30 per cent of the order value, bet365 bonus code 2018n food delivery firms end up losing money on a majority of orders due to high delivery costs and discounts.
Our goal remains to be the preferred food company in bet365 bonus code 2018
Founder and CEO
The biggest headache: sub-optimal usage of riders. Food delivery is always a two-peak business—lunch peak and dinner peak. The low utilisation of riders in the mornings and evenings tear a massive hole through unit-level profitability. Swiggy and Zomato operate a marketplace model involving customers, restaurants and riders, and it becomes very tough to incentivise all three as they compete against each other.
Discounts for customers and restaurants, as well as incentives for riders, lead to massive cash burn.
Even at the height of growth, these inherent issues continued to haunt food delivery players. It led the start-up giants to strategic crossroads, forcing them to make bold moves that reaffirm or redefine the nature of their businesses. In particular, to keep riders meaningfully occupied during the hours they log in and to incentivise them through the day, it was inevitable that food delivery marketplaces step outside food to other verticals.
So, now you have Zomato wanting to take control of the restaurant economy with its B2B supply platforms and Swiggy gradually building its local courier delivery and subscription-based daily needs delivery (see Capturing Everything Food and Hyperlocal). At the same time, the fear of missing out (FOMO) is driving them into one another’s turf. While Zomato is in the process of snapping up 10-minute grocery delivery start-up Blinkit (erstwhile Grofers) to compete with Swiggy’s Instamart, Swiggy is foraying into Zomato’s stronghold of restaurant discovery and reviews with an investment into table booking app Dineout. And both are working on pay later services to help users order food and clear bills at the end of the month.
Since inception, Bengaluru-based Swiggy has maintained a hyperlocal focus. While it did try its hand now and then in other areas such as private labels in food and a marketplace model for grocery delivery, market realities forced it to commit fully to its original principles. The result was a renewed focus on the “neighbourhood convenience economy”, which is something of a new parlance for hyperlocal.
The primary driver of this approach is its express grocery delivery service, Instamart. Launched as an essential-goods-delivery service in the thick of the pandemic in 2020, Swiggy realised its worth in the convenience economy and doubled down on it. Instamart gave the Sriharsha Majety-led company a much deeper understanding of neighbourhood granularities, and helped it build supply chain management and just-in-time inventory capabilities.
And the bet is paying off. Instamart, now available across 23 cities, accounted for about 20 per cent of Swiggy’s revenues of Rs 2,547 crore in FY21. Industry sources put that share at about 25 per cent today. According to top Swiggy executives who spoke on condition of anonymity, the management expects Instamart to outgrow food delivery in the next 18 months. “Our priority and focus are quite visible. We are sponsoring IPL with Swiggy Instamart, not Swiggy. The budget goes under Instamart P&L. Similarly, more than 80 per cent of new capital will be allocated to Instamart for the next year or two,” one of the executives told Business Today.
Co-founder and CEO
With a commitment of $700 million to grow its express delivery business, Swiggy is aggressively building dark stores across the country. (A dark store is a micro-fulfilment centre where e-commerce firms store inventory for rapid online order fulfilment.) As it adds more SKUs (stock keeping units) across its expanding network of dark stores, the AOVs are bound to increase, helping it improve margins. The company targets to clock an annualised GMV (gross merchandise value) run rate of $1 billion in the next three quarters with Instamart.
So, with food and grocery, Swiggy has created two strong revenue streams, which are not feeding on each other. But there’s more. The company is gradually building out its pick-up and drop (courier) service, Swiggy Genie; subscription-based daily grocery delivery service, Supr Daily; and a meat delivery vertical called Meat Stores. Today, the Prosus-backed company delivers food across 520 cities, does local courier service in 68 cities with Genie, and offers daily essentials in six.
The ‘everything delivery’ model helps Swiggy reduce discounts across its platform, and allows it to plug all its riders into a single unit, which enables better utilisation of its delivery fleet. According to the company, it delivers products under 20 minutes in its key markets. As deliveries become fast and spread across the day, riders can fulfil more orders per hour, which allows it to reduce the incentives paid per delivery without affecting a rider’s earnings.
“You get a high open rate for the application when the customers have more than one reason to open your application. You open Swiggy for your food, for grocery, or to send a courier within the same city. This solves for the unit economics and rider optimisation, to an extent. Once you crack hyperlocal logistics, you can build food and grocery very easily, which is what Amazon, Flipkart and Reliance will all do,” says a foodtech company founder who wished to remain anonymous.
Zomato, on the other hand, has always been a food services company. It has stayed true to food all through its many pivots over the course of its journey that started in 2008 as a restaurant search and discovery platform, all the way to going public in 2021 as a full-stack food services company. “Our goal remains to be the preferred food company in bet365 bonus code 2018,” Zomato’s Founder and CEO Deepinder Goyal asserted in a recent blog.
With restaurants as the fulcrum, Zomato has been experimenting with several products to create an ecosystem beyond food delivery services. Products such as Hyperpure, which provides ingredients and other supplies to restaurants; and the recently announced, ambitious 10-minute food delivery, are steps towards expanding its food horizon. As per its December quarter results, supply-chain business Hyperpure grew by 168 per cent year-on-year (YoY)and 40 per cent quarter-on-quarter (QoQ) to `160 crore. Present in nine cities, the company said it supplied to over 27,000 unique restaurants in the third quarter.
‘Zomato Instant’, the 10-minute food delivery service, is being piloted in Gurugram. “Nobody in the world has so far delivered hot and fresh food in under 10 minutes at scale, and we were eager to be the first to create this category, globally!” Goyal wrote at the time of the announcement. The company is currently setting up a network of ‘finishing stations’ or mini-kitchens in close proximity to high-demand customer neighbourhoods, similar to Swiggy’s dark stores. These finishing stations will house bestseller items (about 20-30 dishes) from various restaurants based on demand predictability and hyperlocal preferences. “If Zomato Instant works as envisioned, it will create significant impact on affordability (at least 50 per cent reduction in cost to the end customer), accessibility (reduction of delivery time from 30 minutes average to under 10 minutes), and quality (with influence over the supply chain, we will be able to ensure highest grade ingredients and hygiene practices across the supply chain),” Goyal had said at the time.
Average eating out in urban bet365 bonus code 2018 has grown from two to three times a month to about eight to 10 times. In comparison, most advanced markets in Southeast Asia average around 30+ times a month. In fact, many households in Singapore do not even have a full-fledged kitchen and they make do with a kitchenette. bet365 bonus code 2018 may get there, and may not. But the country could move in that direction. It could become 20-25 times a month in select urban geographies or localities. With quick delivery in food, Zomato is facilitating this movement.
K. S. Narayanan
Food and Beverage Companies
“Average eating out in urban bet365 bonus code 2018 has grown from two to three times a month to about eight to 10 times. In comparison, most advanced markets in Southeast Asia average around 30+ times a month. In fact, many households in Singapore do not even have a full-fledged kitchen and they make do with a kitchenette. bet365 bonus code 2018 may get there, and may not. But the country could move in that direction. It could become 20-25 times a month in select urban geographies or localities. With quick delivery in food, Zomato is facilitating this movement,” says K.S. Narayanan, who serves as an advisor to food and beverage companies such as True Elements, 4700BC Popcorn and Polar Bear-The Ice Cream Sundae Zone, among others.
Beyond food, Gurugram-based Zomato’s first big expedition is grocery delivery, where it had failed twice earlier in a span of two years. Now it is trying to resuscitate that dream. Zomato is in the final stages of acquiring Blinkit, the SoftBank-backed quick commerce platform, in a deal worth $700-800 million. Zomato hopes to leverage Blinkit’s years of grocery business experience and club it with its delivery capabilities to join the quick commerce party without having to build the capabilities in-house. A potential merger offers multiple synergies including better cross-selling between food and grocery products, and effective optimisation of delivery, besides helping Zomato improve its top line, which is growing at a slow pace. On a sequential basis, its revenue rose just 9 per cent for the October-December 2021 quarter.
However, any attempt to ride Blinkit’s capabilities will need to also deal with the eight-year-old start-up’s baggage of challenges. Erstwhile Grofers, which specialised in delivery of groceries, fresh produce, stationery, electronics, and household products, took upon a whole new identity and pivoted its business model to 10-minute grocery delivery in December 2021. It then went on a growth spurt, opening hundreds of dark stores across the country and pumped millions into establishing the required infrastructure. Predictably, the model wasn’t sustainable and within weeks, it closed down services in many areas where it couldn’t fulfil its promised 10-minute delivery. The cash burn was such that the company was forced to shut down many of its dark stores and lay off workforce within months.
Zomato’s decision to fold Blinkit under its wing seems more like corrective action for an investment gone awry than a well-thought-out plan. A $100-million investment in August 2021, which Zomato had said was ‘purely financial’, changed to a merger sooner than expected as Blinkit started bleeding profusely and was looking to raise funds from new investors. Goyal, in his February blog post, rationalised the investment with Blinkit’s $450-million annual run rate GMV (January 2022 annualised) and spread of 400+ dark stores across 20 cities. However, how long will the company foot the cash-bleeding quick commerce business? Will the acquisition help Zomato compete with Swiggy on an even footing? It won’t be easy.
Food as a category offers higher margins, but grocery’s repeatability can bring about economies of scale faster. Swiggy, with an ‘everything delivery’ approach focussed on the neighbourhood convenience economy, seems to be nearing market maturity faster than Zomato’s dedicated food ecosystem play. According to a report by consulting firm RedSeer, e-grocery will be a $21-25 billion market in 2025 while the market size of food delivery will just be about half of it at $12.8 billion.
“The GMV that our food delivery business achieved in 40 months, took Instamart just 17 months, demonstrating the platform benefits of Swiggy. We will double down on this to build more categories in line with our mission of offering unparalleled convenience to bet365 bonus code 2018n consumers. Our goal is to make Swiggy the platform that 100 million consumers can use 15 times a month,” a Swiggy spokesperson said in an email response to a questionnaire from BT.
‘What to order’ in grocery is well defined—households know what they need and have a budget for grocery. The ‘when to order’ is the difficult question as there are no standard routines to grocery and other household needs. Most are unplanned and impulsive purchases. So, quick delivery services are effectively addressing the ‘when’ element for the unplanned needs.
“Instant grocery delivery business today is where food delivery was four or five years ago. They are trying to capture the market and change user behaviour. Deliveries are more or less free. Margins are lower than food. A lot of capital is spent on setting up infrastructure, stocking SKUs and maintaining inventory. The segment is growing at a much faster pace than food,” says Amit Nawka, Partner for Deals & Start-ups Leader at PwC bet365 bonus code 2018.
Instant grocery delivery business today is where food delivery was four or five years ago. They are trying to capture the market and change user behaviour. Deliveries are more or less free. Margins are lower than food. A lot of capital is spent on setting up infrastructure, stocking SKUs and maintaining inventory. The segment is growing at a much faster pace than food.
Partner for Deals & Start-ups Leader
PwC bet365 bonus code 2018