In today’s newsletter, we talk about the different strategies adopted by the two dominant players in the food aggregation space and how they plan to conquer the world with it
Remember back in the old days when people saved restaurant flyers and dialled the number on the back only to be told — “Sorry, no delivery boys available”? It’s hard to believe that was only 5–6 years ago. Ordering food online is now so convenient and affordable that a lot of people in India are doing it almost every day. You can now see delivery executives donning the red/orange shirts in almost every street of the corner and they all seem to be in a mighty rush to reach their destination.
So yeah, Swiggy and Zomato have now become synonymous with food-delivery and yet it seems as if both startups have very different ideas on how they plan to conquer the world.
But first, a brief on all that’s similar between the two unicorns. Both Zomato and Swiggy have raised large sums of money in a bid to reach as many people as possible. The premise is simple — Scale. The food delivery business is a numbers game. Aggregators have to make big investments in technology and manpower to fulfil orders that usually cost a couple of hundred bucks. And for the business model to be financially viable, you’ll have to serve as many customers as you can. The more the customers, the better you chances of turning a profit. It’s just how things work. And both companies have spent crazy money trying to lure people with enticing discounts for far too long now.
And as a consequence, they are still both loss-making (as of FY2019). While Swiggy made losses to the tune of 2300 crores, Zomato posted losses of close to 1000 crores. This despite the fact that both are roughly making the same kind of money (revenues of around 1000 crores) And for the most part, this bit is pretty clear. But what’s perhaps not as apparent is how they plan to branch off.
Consider, for instance, Zomato. It’s trying to be a one-stop-destination for foodies across the country. Whether you want to order in, go out for a meal, or simply lie in bed thinking about what you’re going to eat on a cheat day, Zomato’s got you covered. In fact, it’s currently the only app in India which acts as an extensive encyclopedia of restaurants, complete with ratings, average cost, menus and reviews. So even if there’s a restaurant on the side that’s not doing home delivery, Zomato is likely to have the restaurant catalogued on its app. Hell, they even have their own streaming service replete with about 18 original shows just to keep you consumed. And this tells you something very important. Zomato’s focus is on food and food alone. And it wants to capture the whole value chain — from restaurant discovery to delivery.
Swiggy doesn’t do any of this. Instead, they’re focusing on their delivery ecosystem to explore new categories. Think groceries, medicines etc. Ergo, they are using their delivery personnel to run errands for people who don’t have the time to do it themselves. It’s something that another startup, Dunzo’s being doing for a while. But now Swiggy is taking a stab at it. And considering they already have huge manpower at their disposal, they can easily expand into the B2B space as well. Its like running errands for other businesses instead of consumers. The only difference is that this area is still relatively unexplored. So yes, Swiggy is looking beyond the food space, whilst Zomato is only talking food.
Granted both companies have their eyes set on achieving a path to profitability, but it's clear that they are beginning to adopt very different strategies to get to the end goal. So what do you make of the food delivery ecosystem in India? Who do you think is best placed to win this war?