- Gurugram headquartered food technology company Zomato informed the market regulators that it will close down its subsidiaries Zomato Media Private Limited headquartered in Singapore and Zomato UK Limited located in the United Kingdom.
- The net contribution of both subsidiaries to the company’s turnover is zero, said the documents filed by Zomato.
- Earlier this month, the company announced that it will also wind down its US subsidiary, Zomato US LLC. The company also sold NexTable, a US based restaurant booking platform for Rs 74.24 lakh.
Food delivery giant, Zomato India preparing to launch an Initial Public Offering (IPO) in the first half of 2021 is set to raise a little over $146 million as part of its Series J funding in a final push.
As a part of the Sequence J sequence, Zomato has already raised funds from major investors to date amounting to over $270 million.
So what do you do when you have multiple ways of making money? You look at your growth category and you realize that you need to grow really fast. But then, your (smarter/aggressive) competition has raised a massive round – so you need to attack where it matters the most.
Let’s just bring all their business to your own platform. How? Charge no money to vendors!
It may not impact you directly because you can still make money from the other sources – but your competition whose entire model is based on ‘that’ growth category will bleed.
So yeah, Zomato has launched ‘ZERO’ commission on food ordering – a direct assault on Swiggy (which recently raised $80mn).
In “Trying-to-be-nice” wordings:
“Our core advertising business in India, Southeast Asia, and the Middle East – the three key regions for us, is generating enough cash to cover for the millions of dollars of investments we are making into the rest of the regions, and our new businesses.
To mark this momentous occasion for us (and Indian tech startups in general), we want to give back to the community which has played a significant role in our journey – restaurant owners. We are rolling out a token of appreciation for restaurant owners and small business owners on our food ordering network in India. What’s that? Zero commission for all food orders placed through Zomato. (source)”
Basically, get all restaurant owners to move their online ordering to Zomato.
By the way, Swiggy charges 30% commission fee.
Swiggy’s revenue per order (the 30% that is being talked about) is a blend of 3 parts, the commission we get from the restaurants, delivery fee charged from the consumers and discretionary advertising revenues.
And Zomato will charge ZERO.
Why in the world would a restaurant stick to Swiggy, unless it is providing a very differentiated experience?
Note that the world now knows about Swiggy’s business model, thanks to the anonymous troll post.
As far as Zomato is concerned, well played.
Zomato has recorded revenue of $49mn in FY17, 80% growth over the last year. Majority of this is being driven by the food ordering business.
Zomato has also reduced its losses – the annual operating burn is down from $64m in FY ‘16 to $12m in FY’17.
Right now, the average monthly cash burn for the period of December 2016 – March 2017 is a little less than $250k globally, down from $4.2m last March; and we’re well on our way to hit profitability.
Online ordering brought in $9mn revenue (FYI: Swiggy recorded revenue of INR 23.59 crores against a loss of 137 crores in FY 15-16).
The company has also redesigned its ad serving model – which led to growth in revenue to $38mn!
For starters, we stopped accepting advertising from low rated restaurants, so that our users only see the best that’s out there. The new product provided smarter targeting, simpler interface and greater visibility to our well rated advertisers. We rolled this out globally by September 2016 and helped our merchants realise a ~3x increase in value from advertising on Zomato. Our ad sales revenue grew to ~$38m in FY17 (source).
What’s Zomato’s secret sauce?
Watch this chat with Deepinder Goyal, Zomato cofounder and CEO on lessons learned building Zomato.
Recommended Read : Why Zomato runs ads on porn sites.
Zomato has entered infrastructure play (rather, ‘asset heavy business’) with the launch of Cloud Kitchen.
Zomato Infrastructure Services is a kitchen infrastructure service where in Zomato will work with current restaurant business owners to expand their business to more locations without incurring any fixed cost. Zomato will provide the real estate infra service to select restaurants.
The pilot kitchen is in Dwarka which will start to cook in the first/second week of March.
Is there tech in this version of Foodtech?
The entire tech stack these kitchens would need is provided by Zomato free of cost to restaurants and is part of the “infrastructure” services.
Zomato Base (POS), and Zomato Trace (Delivery Dispatching and Routing) are the two key components of the tech that will go into these kitchens (more here).
Sanjeev Bikhchandani, vice chairman of Info Edge, has said that online food ordering accounts to 20% of Zomato’s revenues, which is currently operational in India, Dubai and Phillippines. Info Edge is the largest shareholder in the online restaurant discovery and food-ordering platform.
At a time, when many of the online food ordering apps and services have shutdown or are on the verge of shutting down, Zomato had posted an operational revenue of Rs 184.97 crore for the fiscal year 2015-16, although its losses shot up by 262% to Rs 492.3 crore.
Zomato CEO Deepinder Goyal has in the past claimed that the company is profitable in the order business at a unit economics level, and the overall online ordering business will hit profitability when they hit an average of 40,000 orders a day. The company currently sees a daily average order of around 25,000-26,000, although there are also other conflicting numbers floating around in the media.
In September this year, Zomato acquired logistics technology startup Sparse Labs to help strengthen its delivery systems.
Online restaurant and food delivery company Zomato has acquired Gurgaon-based Sparse Labs, which has developed a solution for restaurants to track deliveries and minimise delays.
The financial details of the acquisition was not disclosed by the company, however, as part of the deal, Pankaj Batra, the founder of Sparse Labs will join Zomato to “continue developing his vision”. Sparse Labs will be renamed as Zomato Trace, and will be given free of cost to restaurants on Zomato’s food delivery network.
Online restaurant discovery platform Zomato has pulled back its presence from 9 global markets out of its total 23.
The company is no longer physically present in the countries where it is not a market leader, which includes US and Canada, UK, Italy, Sri Lanka, Ireland, Chile. The company will remotely continue to operate in the markets from India headquarters.
To gain market share in the US, the company had earlier acquired Urban Spoon for $60 million. But the acquisition did not boost the company’s growth in the market. And thus, understanding that, the company now wants to grow its revenue share in India and UAE, its two largest markets, where there has been a dip in the recent months.
Zomato’s losses have shot up to Rs 492.3 crore for the financial which year ended in March 31, 2016. But, the company attained operating revenues of Rs 184.97 crore which increased from Rs 96.7 crore in the previous year.
Gurgaon based Zomato’s losses have shot up to Rs 492.3 crore for the financial which year ended in March 31, 2016, according to the company’s lead investor InfoEdge. In the previous year, the company witnessed a loss of Rs 136 crore.
But, the company attained operating revenues of Rs 184.97 crore which increased from Rs 96.7 crore in the previous year.
Zomato had earlier claimed that it has achieved operational break even in six countries including India, the UAE, Lebanon, Qatar, the Philippines and Indonesia.
The online restaurant discovery platform has been investing in delivery services with the intent to expand and overcome the tough competition in the food tech segment. But, recently its valuation had been marked down at $500 million by HSBC which was strongly disagreed by InfoEdge and Zomato.
Clarifying the mark down, Deepinder Goyal had stated,
We already are profitable in the order business at a unit economics level, and the overall online ordering business will hit profitability when we get to an average of 40,000 orders a day. We should get there in the next 3-6 months. Also, there isn’t any food delivery company in the world which owns its last mile logistics fleet, operates at scale, and is profitable.
After Flipkart, now Zomato has landed in trouble.
Zomato’s valuation has been marked down at $500 million by HSBC Securities and Capital Markets which is about half the valuation at which it raised $60 million in its last round of funding, reports Mint.
HSBC analyst Rajiv Sharma, in a note to clients, said, “We do a DCF (discounted cash flow) and value the (Zomato) business at about 50% lower to the $1 billion valuation. Zomato is present in 23 markets so early on and none is profitable, implies that to address both the investments in last mile delivery and losses in international operations fund raising will be a continuous phenomenon, suggesting current valuations don’t make much sense.”
However, Zomato said that the investors do not understand the business model and will become profitable very soon. The company has also claimed that it is profitable in eight countries and its ad business in various countries has up to 93% gross margin.
Contrary to HSBC’s view, InfoEdge which owns 47% Stake in the firm said that the company disagrees with the points raised by the HSBC report. It also added that Zomato’s revenue has more than doubled in the last nine months and burn is down by more than 70%.
P.S At Unpluggd Winter Edition 2015, Founder of Zomato Deepinder Goyale had shared his business model and the lesson learnt by the startup. Check it out here:
Here are few excerpts from what Deepinder Goyale said in the official blogpost,
Our traffic in India, our home market, also grew 8% in April 2016 over March 2016. We have over 8.5 million monthly uniques in India alone – very few Indian companies can claim that much traffic share in a single category. Also, we are currently present in 23 countries, and we are the market leaders in 18 of them.
To give you a little perspective on where we are at, we hit 33,000 online orders yesterday – at our average order values, it makes us the largest player (and only profitable players on a unit economics level) by GMV (there’s a blog post coming soon about our food ordering economics). We already are profitable in the order business at a unit economics level, and the overall online ordering business will hit profitability when we get to an average of 40,000 orders a day. We should get there in the next 3-6 months. Also, there isn’t any food delivery company in the world which owns its last mile logistics fleet, operates at scale, and is profitable.
Also, my thoughts on valuations – nobody who knows our business has marked down our valuations. In fact, our existing investors are bullish about us, and are willing to back us further, if needed. And they have categorically said that our valuations are justified. Especially because we are more than doubling year on year, and the next year looks even more exciting for us.
Last UnPluggd, Deepinder Goyal (CEO of Zomato) spoke about going from foodlet.in to foodieBay.com, (almost) getting a legal notice from eBay, re-branding to Zomato in 2010 and everything in between.
By 2012, Zomato had beaten burpp & were the biggest players in town. They had 2 options: Stay in the country and launch more verticals or take the same business to more geographies. They went with the latter and that has made all the difference. They launched in Dubai in 2012 and within 6 months of their presence in Dubai they started getting more traffic than the population of Dubai. Currently, Zomato has its presence in over 23 countries and across 10,000 cities.
Key Lesson Learnt:
“One size fits all, doesn’t actually work when you are launching in multiple markets. You need to customize your product to fit local markets. “
Post 2014, Zomato spread its wings and acquired 6 global restaurant listing companies including Urbanspoon. Acquisition of Urbanspoon was a strategic move to enter the Canadian & Australian market and not US (according to the popular belief)
Pick your battles wisely. If you run away from the battle that might kill you, then you might actually live to fight another day!
Deepinder Goyal believes that there is a certain amount of discipline that is needed to make startup work. Discipline, Teamwork & Trust are the three most important pillars of zomato’s culture.
Investors and funding:
Zomato was bootstrapped for the first 2 years and used to execute a lot, even with very little money in the bank.
Key Lesson Learnt:
Do not build a business for investors , keep on building and one day people will believe in what you are building.
There are a lot VC’s in the industry who believe that money can solve every problem, disrupt any market & build any business – avoid them!
There is much more than money which goes into building a great company and If you have the right thing to say – anyone will listen to you!
Highly targeted banner ads on the website generate the majority of the revenue for Zomato. Zomato claims to have a click through rate of 17% & out of which 8% of the clicks translates into real business for those restaurants.
Going full stack on food tech & to make Zomato a utility app which integrates restaurant discovery, online ordering, table reservations , delivery & to bind everything together with Point of sale.
The Next edition of UnPluggd is scheduled for 6th & 7th of May 2016 in Bangalore where you’ll learn how to build great products and sustain during tough times! The #Superheroes edition will focus on deeper content and actionable insights.To know more, check out http://nextbigwhat.com/
Use coupon code SUPERAPRIL to book tickets at 20% off (expires on 30th April).
We were primarily a content/media product company until about mid-last year, when we launched our online ordering (delivery) service. We weren’t a newcomer in the space, though – back in 2005 (long before Zomato/Foodiebay was born), Deepinder (our Founder & CEO) launched what was probably India’s first online food delivery site, named Foodlet.
Our new online food ordering business has been one of our steepest learning curves. While we had learned our fair share of what to do and what not to do by observing other players in the space, most of our learning has come by doing.
Two million orders and many thousands of happy customers on, this post is to put forth some of our key learnings (new ones and reinforcements) from our online food ordering business.
Focus on customer delight and cohorts
In any business, you are only as good as your customers think you are. We hustle for every single customer’s issue, and make sure that we minimise our order failure rate (orders which don’t get delivered for one reason or another) – that number is well below 0.5% now.
One truth we learned very early on is that apart from the usual stuff, there’s literally any number of things can go wrong with an order despite everyone’s best efforts. And it’s up to us to make things right. Something we’ve been doing since the very beginning in situations that hit rock-bottom with customers is to send them a care package, with a personalised handwritten note. It’s a small gesture that makes a big difference.
Another thing we’ve done is to make our support team very easy to access via a chat feature, built right into our app. It saves customers the hassle of making phone calls for any kind of order query or request, and helps us serve them better.
Going the extra mile to tell our customers we care about them has made a difference, and it shows in our customer retention rates. Over time, our cohort curves have begun to look like smiles, and the frequency of orders has also grown exponentially for returning customers. In India, the order frequency for retained customers has increased 2x from 1.5 in Jun ‘15 to 3.2 in Jan ’16, while in the UAE, frequency has increased an even more significant 4x from 1.6 in Sep ’15 to 5.1 in Jan ’16.
A low-spending customer will always be a low-spending customer
A few weeks ago, we ran the numbers on the first-order value for a group of customers to see if we could predict the basket size for their future orders. We found that the value of the first order does define how much those customers will spend in the future – a staggering ~70% of the customers whose first order was lower than Rs. 200 have not spent more than Rs. 300 on future orders.
This trend becomes especially relevant if you are luring customers to your platform by running offers that drive the cost of a meal below the Rs. 300 mark, and then taking on the cost of delivering the meal yourself. Customers might love it, but it’s a double whammy – they end up spending less on future orders, and it hits the unit economics hard. Even if you aren’t doing the last-mile delivery yourself, it’s very hard to make a single penny out of an order upto Rs. 300 value. Which brings us to the next point…
Focus on valuable volume
The only way to counter the trend of low-value first orders is to have a large enough number of high order value restaurants that can balance out the economics. Our Average Order Value (AOV) is very high (Rs. 500 ($7.5) in India, and AED 60 ($17) in UAE), because we’ve focused on partnering with a healthy mix of restaurants across the price spectrum. This way, the economics balance out if we have a small number of customers ordering a meal for one with a relatively lower AOV.
Burning money in an unreasonable way to grow the business doesn’t make sense. Agreed, competition is tough, but positive unit economics are necessary for any business to scale. Building companies on negative unit economics is an unproven concept, and has far too many disasters associated to it.
Don’t set expectations you can’t sustain
As much as you’d like to, you can’t promise 30-minute delivery with no-questions-asked refunds for orders below Rs. 500 – that’s like trying to provide Taj-quality services at corner-sweet-shop prices. It is important – and sensible – to set very real and sustainable expectations with customers. And while some of these pain points can be solved with tech, using brute force and money to try and provide a differentiated level of service can only last as long as the money in the bank.
We recently deployed a preliminary version of a self-learning algorithm that predicts how long it might take for a restaurant to deliver to a specific location at a certain hour. When customers in that location are browsing restaurants they can order from, we show restaurants that will deliver food to them the fastest first. This (and some other cool tech) brought our average delivery time down to 38 minutes over three months.
Ask yourself a question – what’s your unfair advantage?
Our unfair advantage is our traffic from our search and discovery business, which we’ve spent years building. It’s given us a large number of users we can gradually start moving from using Zomato to just search for restaurants, to ordering from them online. This directly affects our Customer Acquisition Cost (CAC), which works out to near-zero ($0.07 at the time of writing this).
Zomato users call restaurants through Zomato to place a food order 200k times every day – our aim is to convert a significant number of those to online orders relatively quickly. But the most exciting thing for us is that of the 10 million monthly active uniques in India and the UAE – the two markets where we have launched online ordering – less than 2% of them are currently ordering online on Zomato. So theoretically, there is room to grow 50x within Zomato before we need to go acquire new customers.
Money is never an unfair advantage unless you have orders of magnitude of it greater than your competitors. Even then, the service you provide needs to be of the highest quality, or you will get killed by the marketplace.
The restaurant is as important as the customer
We approach restaurant partners with the understanding that our relationship with them will go beyond the transaction. It’s straightforward – if restaurants succeed, so do we. Our classifieds business gave us very clear indicators of where the customer interest was, and how we could expect a restaurant to perform. We brought these partners on board, and work with them on an ongoing basis via dedicated account managers whose mission is to ensure that our partners grow and keep our customers happy. We increased our acceptance rates dramatically from 87% to ~95% by working proactively with restaurants to help them understand the importance of great customer experiences.
Bringing high-potential restaurants on board has proven to be a key growth driver for us, and they are seeing the results too – as of today, over 3,000 of our partner restaurants are consistently receiving at least 30 online orders a month via Zomato. And we are just getting started.
Every day should be better than yesterday
Of all our teams at Zomato, our order team possibly iterates the most on a daily basis. The delivery business is extremely dynamic, and the only way to stay ahead of the game is to continuously improve various things we do every day. There are various vectors in this business, and more often than not, improving something ends up compromising something else. The trick is to find the right balance which is sustainable for the business. Every 0.5% margin improvement, and 0.5% improvement in customer retention rates make a difference. And the only way to continuously improve is to never consider something as “done”.
That’s about it for now. Hopefully, we should have more to share in a few months from now. Also, coming up in a couple of days – a post on how we built the transactions DNA at Zomato. It’s the background story on how we pivoted our DNA (and not just the business) from that of a content business to a transactions business.
[About The Author: Pankaj is the cofounder Of Zomato.]
Zomato has launched table booking service and the same is available at restaurants in multiple cities and languages. The feature allows users to make, modify, and cancel bookings in 3 simple steps at any given time of the day, even outside of the restaurant’s operating hours. The app also makes bookings stress-free by syncing them with calendars, and sending reminders prior to the booking time (Zomato earlier acquired NexTable, a reservation platform).
Zomato has partnered with hundreds of notable restaurants to enable users to book tables via the Zomato app and website. Zomato had earlier launched their online ordering services in April 2015 to help simplify food ordering for customers.
“We understand that restaurants want – and need – integrated solutions; that’s why we’ve spent countless hours designing an ecosystem, not just a single app. Zomato Book integrates with our other products to ultimately give restaurant managers a seamless solution for enhanced consumer delight.
Hundreds of businesses around the world – ranging from small to 1000+ seat restaurants, and even theme park resorts – are already using Zomato Book.” said, Deepinder Goyal, Founder & CEO, Zomato
At present, over 500 establishments across 21 cities globally are using Zomato’s table management and booking systems, and the number is growing by the day.
Restaurant partners include major multinational brand names such as GQ at the JW Marriott in Dubai and the Kempinski group in Dubai and Ajman, Hard Rock Cafe and The Hilton and The Conrad in Istanbul, Universal Studios Resort in the US, Le Meridien in Gurgaon, The Lalit Hotels across India, as well as local favourites such as Summer House Cafe in Delhi, Arbor Brewing Company in Bangalore, and The Bombay Canteen in Mumbai.
Recommended Read : How India Orders Food Online
Zomato will be shutting down its online ordering service in Lucknow, Kochi, Indore, and Coimbatore.
Gurgaon based Zomato which launched its online food ordering business in April 2015, had since expanded this offering to 14 cities across India.
Pankaj Chaddah, Co-Founder, Zomato, said, “We are shutting down the ordering business in Lucknow, Kochi, Indore, and Coimbatore. The size of the market is in these cities is small right now and is growing with time. We will re-launch when the time is right. In the meanwhile, we will continue to offer the best content (including scanned menus) to ensure that foodies are able to find and order great food.”
The company in a statement said, the combined order volume in these 4 cities accounted for less than 2% of Zomato’s total order volumes. Overall, Zomato’s online order volume is growing at a healthy 40% month-on-month. Less than 5% of Zomato’s orders are discounted, making Zomato one of the few tech startups to not use negative gross margins to grow the business.
Recently, Grofers shutdown its online ordering service in 9 cities citing the same reason.
Zomato which has 75,000 restaurants listed on its platform in India works with delivery partners Grab and Delhivery to offer delivery from restaurants which do not otherwise deliver food.
Recently, an online petition was started which asked Zomato to ensure background checks for the delivery teams.
An online petition was recently started, urging Zomato to ensure background checks and training for its delivery team to provide a safe food delivery option for women.
While Zomato functions as the technology enabler for online ordering and does not have its own delivery fleet.
Pankaj Chaddah, Co-Founder Zomato said, “Safety of end consumers should be a collective responsibility of all involved parties and we should take it very seriously. Zomato does not employ our own fleet of delivery personnel, we just enable users to place their orders online at restaurants, and the restaurant employs delivery boys (or a third-party logistics firms deploys delivery boys), but we understand that this concern is a serious one. We are working with our logistics partners Grab, and Delhivery, to ensure police verification is done for all food delivery personnel, and with NRAI (National Restaurant Association of India) to advise restaurants to do so for their own delivery personnel as well. As one of the leaders in the food industry, it is incumbent on us to drive the importance of ensuring that safety of our users is not compromised and we are all collectively working towards this very important goal.”
Tejaswini Naik’s letter to Zomato CEO, Deepinder Goyal
Zomato, implement background verification for all your delivery boys and recommend the same for the restaurants you work with to keep your women customers safe. These are your employees and representatives, and we would like to know that it’s safe for them to have our phone numbers and addresses. It is your responsibility to implement this and reassure all your customers.