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Do you want to know about the secret behind Zomato’s exponential growth? Or want to know how the food delivery giant maintains the cash flow?
In either case, read the whole blog to trace out the mini-case study of Zomato. Also, don’t forget to read till the very end there is top two Most frequently asked question answered!
There were days when an individual had to place food orders by calling different restaurants and again for reservations and food deliveries. A change, unlike any other minor administrative ones, occurred in early 2008-09. And it was during those vital years of change that the foundation of India’s largest food aggregator got laid. Yes, you heard it right; we’re referring to Zomato!
Zomato: Initial days
Initially, in 2008, platforms like Zomato got launched and changed the standards of food delivery in India for thousands of people. At first, the talented duo Deepinder Goyal and Pankaj Chaddah used to upload soft copies of menu cards on their website, and with leaps and bounds, they aided the process of eating out and food delivery.
It focuses on providing basic information about restaurants, such as menus and user feedback. Besides, the aggregator offers food delivery from partnered restaurants in almost every city in the country.
It was initially known as Foodiebay and gradually garnered popularity in the metropolitan cities by large. In just nine months, they earned massive recognition around the country and became the leading restaurant manual in Delhi NCR. That got followed by an extension to cities like Mumbai and Kolkata.
After Foodiebay had amassed a large user base and attracted investors in 2010, the founders planned to change the company’s name and expand internationally. The business was renamed Zomato at this stage. As a result, the company’s roller-coaster ride began.
Zomato Team & History
One fine day the founder duo, Deepinder Goyal and Pankaj Chaddah, saw a long queue at the restaurant’s door to get a glimpse of the menu card.
It was only then when they thought to launch a website where users found soft copies of the menu cards of different restaurants along with reviews.
This way, the company got ideated at the first instance.
The employment lineup is of the values that hiring the right people is the key to their company’s amazing progression. Recruiting a unique pool of workers was also one of the significant achievements made during the foundation building phase for the company. The organization now has a team of more than five thousand employees.
Zomato observed a vertical rising curve in its development. It gets credited to the fact that it took no time to spread its wings throughout the world.
The business quickly expanded beyond Delhi NCR, with offices in Ahmedabad, Pune, Bengaluru, Hyderabad, and Chennai.
In 2012, it initiated its global expansion by offering facilities in the United Arab Emirates, Sri Lanka, South Africa, Qatar, the Philippines, and the United Kingdom.
Next year, Turkey, Brazil, and New Zealand were added. But they did not stop there. Due to its exponential growth, they began their food delivery app.
Not only that, but the organization went even further by enthusiastically acquiring international competition to develop its web of services in the global domain.
In 2014, the company acquired Gastronauci, a restaurant search service in Poland, and Cibando, an Italian restaurant finder. The following year, it made its principal acquisition: NextTable, an online reservation company located in the United States.
The company has acquired close to 14 businesses in its 12 years of operation. Uber Eats – India, which they acquired on January 21, 2020, was their most recent acquisition. They paid $206 million for Uber Eats India.
That made the food delivery application a market leader in India’s food delivery industry, with about a 50% market share. And with the ongoing pandemic and the WFH culture, the number is expected to rise much faster.
With Swiggy as the only competitor, particularly in India, the acquisitions made by Zomato unravel the strategy to reduce the competition and thrive in the Indian subcontinent.
Bringing The door-to-door Delivery System
Financiers have been paying close attention to the food distribution market in India, as it has been to its peers around the world. Both Swiggy and Zomato have bagged a lot of investments in the last few years. Incidentally, Zomato has approximately 1,50,000 listings from India out of a total of 1.4 million listings worldwide.
Every two months, 22 million new users join the platform in India who never used its distribution service before.
Zomato wants to take advantage of this opportunity, even if it’s just a tiny part of it, to expand its food delivery market. When asked about it, Deepinder Goyal said that about 5% of the 22 million new users try food delivery once a month and that the acquisition is unrestricted.
Food distribution is not a stand-alone business for the Indian food delivery giant but rather an ecosystem advantage.
Zomato charges restaurants a commission based on the number of orders they get when it comes to food delivery.
The establishment makes money when users pay delivery fees because restaurants pay commission to the company for each delivery. After that, the price gets divided between the business and the distribution partner(s). These commissions vary depending on whether the restaurant employs its riders or hires the food aggregator to handle the delivery. This figure adds to the company’s net profits in a minor way.
Business Model of Zomato
One of the primary sources of revenue for Zomato remains the advertisements that the portal offers to view. The bulk of its income comes from this, followed by fees charged to restaurants. It operates based on a commission-based business model.
The founders did not place a high priority on making money initially, but as the website grew in popularity, they saw the opportunities that came with it.
Zomato has a customer base of 62.5 million users.
As a result of these advantages, many restaurants have put ads to earn a lot of money. It initiates cashless transactions for its customers who want to pay digitally.
The performance of the company demonstrates that hard work and dedication to succeed can contribute to the achievement of desired outcomes.
Besides advertisements, the secondary income sources of the company are listed below-
● Home delivery: Though advertisements amounted to the majority cash flow in the establishment, the introduction in 2014-15 of food delivery completely changed the scene.
● Like any new service, the home delivery of food didn’t contribute much to the revenue initially.
● But with the digitalization boom in 2016-17, food delivery amounted to 30% of total revenue in 2018 from 2% of the previous year.
● Zomato Gold: Introduced at the end of 2017, Zomato Gold currently accounts for 14-15% of the monthly revenue for the food aggregator.
● Until November 2017, the company did not charge anything from its customers for dining-in in a particular restaurant.
● But with the addition of the feature, the food delivery giant offered a nominal monthly charge at the customer’s discretion, which enabled them exotic discounts and rewards at selected restaurants.
● Such an initiative benefited the customers and rebooted and increased sales of many restaurants on the verge of going bankrupt.
● Sales of Tickets: Not many people are aware of the fact that the food delivery giant also earns commission through ticket sales of diverse events while delivering the food.
● Sales of tickets for events like Zomaland and other events, especially cricket matches, help the company to maintain relevance in the social world and earn decent profits.
● Consulting and Data Analytics: The enormous collection of data and user feedback also helps Zomato as a company to prosper financially.
● They offer several consulting and data analysis services to their undisclosed clients, mostly restaurants and hotels.
Investors & Funding
Zomato has outstretched almost $1886.6 million in funding to date. It recently closed a $250 million funding round, commanded by well-known investors Tiger Global, Kora, and Fidelity, in February 2021. Kora spent $115 million in this round, whereas Fidelity put in $55 million and Tiger Global spent $50 million.
With its significant investors, Info Edge(18.4%) & Ant Financial(23%), the company recently got transformed into a public limited company.
And aims to launch its Initial Public Offering in the latter part of 2021 after accumulating fundings, close to $1 billion.
Talking about it, do check out our blog on the top 4 upcoming IPOs in 2021, which includes details about Zomato’s IPO.
Zomato has launched a campaign to take in fresh, clean, and excellent products and supplies. Zomato’s Hyper pure is modernizing the restaurant industry. It is the B2B food tech vertical for the company. Cafeterias can order everything from vegetables to meats, even dairy, and beverages online using Hyper pure.
It claims to procure these items directly from farmers, workshops, producers, guaranteeing quality and reliability. Such initiatives help an establishment to win on both the grounds, financial and humanitarian.
Challenges faced by Zomato
After 2014, the graph did not remain the same as before. The year 2015 brought a slew of challenges, forcing the organization to make some tough decisions. Since acquiring Urbanspoon and rebranding it as its own, the business struggled desolately, to the point that the company was forced to sack 300 staff members.
There’s a lot more to come in their journey ahead. Zomato underwent a big holdup in 2018 when its existence was put at risk with a cyber-attack when some hackers gained access to the company’s servers, including 17 million users.
In 2019, a movement called #logout arose, in which restaurants on the site blamed the business of consuming their profit margins through features like Infinity Dining and Zomato Gold, which offered customers steep discounts. In the middle of significant protests from its affiliated restaurants and layoffs in the group, Zomato stopped its Infinity dining service and revised the Zomato Gold rules.
Zomato’s restaurant partners increased by 177 percent, with 73Knew restaurants joining the platform. In 2019, Zomato had 43K restaurants, while today, it has close to 119K.
Present scenario of Zomato
Zomato experienced a record increase of 225 percent in its sales in the very first half of FY2020. The company’s twice-a-year report reported that it had displayed $205 Mn in sales instead of $63 Mn (in the first half) of last year.
Zomato’s route so far has had its peaks and valleys. But it wouldn’t be prejudiced to claim that almost all startup companies face ups and downs in their early years. In the end, what matters is their determination, their will to stand by the company and its ideals, and the choices they make in stiff circumstances.
In the present day, the company is looking to raise supplemental funds to improve its service offering. Its objective is to grow into new markets and consider other potential growth areas. It will be essential to see what lies ahead for Zomato as it competes with Swiggy, its biggest competition.
Top Frequently Asked Question
1. What is the salary of a Zomato delivery boy?
Although many factors have an impact on the salary of a delivery person in Zomato, the average earnings range between the slab of ₹25000-₹50000.
Factors like the region of the service, delivery frequency, and customer ratings affect the income of the delivery representative.
As per the information available in the public domain, a delivery agent gets paid on a per-order basis.
Rates for completing an order successfully(Touchpoints), waiting time, distance fee are fixed and the agents get paid accordingly.
Furthermore, they also get incentives(Target-Pay), other than the per-order payment, after completing a specific number of orders.
2. How do you tie up with Zomato?
Go to Zomato’s listing page and Sign in with your account details. Then, fill in the details of the restaurant accurately.
The details include the name, status, and contact number of the restaurant. Click on Add restaurant to finish the process.
After the form gets submitted, concerned supervisors would visit your restaurant for verification of details and license.
Once the verification gets done, the restaurant would start appearing on the application.
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