The Indian food delivery industry which is expected to breach the $10 billion GMV (Gross Merchandise Value) by 2025 is going through a major shift in strategy as Swiggy and Zomato are targeting a new segment that could eventually dictate their market share. Currently, both of them have a market share of 45% each and the remaining 10% is held by other players.
Restaurants, especially smaller ones are tapping on SaaS-based CRM tools, inventory management software, point of sale automation and reservation automation tools to drive up demand that they lost during the pandemic.
Rohan Aggarwal, associate partner, RedSeer said, “Restaurants usually list on multiple food platforms, and each platform has its own backend software. On peak or high demand timings, it would have been difficult to manage orders from multiple platforms, and hence there was a need for a separate software platform that would aggregate all this live order on a single dashboard, making it easier for restaurant owners to manage orders. That’s where the need for restaurant SaaS began in the Indian context.”
As per Industry estimates, both Swiggy and Zomato process around 1.5 million orders on a daily basis and operate in 500 cities. However, these do not translate to meaningful profits.
Grocery Delivery
Zomato is already in talks to merge with Blinkit (formerly Grofers), a 10-minute grocery delivery app to chase additional revenue by delivering groceries, while, Swiggy’s Instamart quick commerce service clocks 1 million orders. Grocery delivery can help the companies to utilize their delivery fleet during non-peak hours when food is hardly ordered.
SaaS segment
Zomato’s primary revenue source included ad sales, food delivery, Zomato Pro subscriptions and orders, in FY20. Though it was formed in 2008, it did not deliver food until 2015. The company is now doubling down as a direct service provider for restaurants by offering online discovery, table booking B2B raw material, cloud kitchen and more. Zomato has made multiple acquisitions in the SaaS segment and has paid $5 million in cash to acquire a 5% stake in UrbanPiper, a restaurant management platform.
On the other hand, Swiggy is also reportedly in talks to acquire PoS software provider Dineout in a $25-50 million deal. Dineout offers SaaS tools and is one of the leaders in the online restaurant reservation space. If this deal goes through, it will provide Swiggy with sufficient manpower and the tech stack required to break into the restaurant SaaS space.
Will a merger with Blinkit add to the ongoing rivalry?
According to a Reuter’s report, Blinkit is valued at somewhere between $700 million and $750 million. Zomato has acquired a little more than a 9% stake in Blinkit. Zomato said that it would loan as much as $150 million to Blinkit for the start-up’s near-term capital needs. Earlier, this year, Zomato said that it would invest as much as $400 million in the Indian quick commerce market over the next 2 years.
In December last year, Swiggy said that it would invest $700 million in Instamart, its grocery delivery service. Instamart has started to compete with Blinkit and Zepto. Swiggy has started preparations to raise at least $800 million in an IPO next year, as per a report by Reuters. It has begun adding independent directors to its board and is trying to position itself as a logistics company and not just a food delivery firm.
Zomato’s IPO, last year had a stellar debut in the stock market after which its share price plummeted. Currently, Zomato sits at a market capitalization of ₹62,660 crores or $8 billion which is about half of the $15 billion market capitalization that it reached in November 2021.
Swiggy is valued at $10.7 billion, which is more than Zomato, ever since it has raised $700 million from private investors in January 2021. Swiggy plans to invest this capital to enhance its 10-minute delivery and grocery vertical InstaMart.
Zomato said that its 10-minute delivery will be launched in Gurgaon, next month. It added that the quick delivery service will rely on a network of ‘finishing counters’ which will be located in high demand customer neighbourhoods.
Recently, it acquired a robotics startup Mukunda and said that the food will be “sterile, fresh and hot at the time it is picked up by the delivery partner” as it will use “sophisticated dish level demand prediction algorithms and future-ready in-station robotics.”
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