zomato business plans

Unlocking Success: Understanding Zomato's Business Model and Revenue Strategies

PV Vyshnavi , Akshat Hawelia

Zomato is an Indian restaurant search, discovery and online food delivery service . The food tech unicorn was founded by Deepinder Goyal and Pankaj Chaddah in 2008. Zomato is well known throughout the country and has also managed to venture into many international markets over the years. It currently operates in 10,000 cities in 24 countries, including the USA, India, Australia, Brazil, New Zealand, Singapore and the United States and in the Middle East Qatar.

Today, Zomato focuses on online food ordering, restaurant reservations and loyalty programs, consultant services and a lot more. Zomato is also a food search engine that works the same as Google's search engine but explores a wide range of food and restaurants. The company has grown from a home project to one of the world's largest food aggregators. Zomato not only connects people to food in every context but also works closely with restaurants to enable a sustainable ecosystem.

With its unique and sustainable business and revenue model , as well as a well-defined organizational structure of Zomato, the company has managed to remain a top player in the market. Zomato has become successful because of factors such as affordability, easy accessibility, and assortment, which have built trust among people from the years of service. Zomato continues to work on finding innovative ways to serve its customers.

Zomato - History Zomato - Business Model Zomato - Revnue Model Zomato - Value Proposition

Zomato - History

Zomato, which was earlier known as Foodiebay , was established in July 2008 by two IIT graduates, namely Deepinder Goyal and Pankaj Chaddah. The idea first struck Deepinder when his colleagues consistently had a demand for paper menu leaflets from different restaurants to order food. That is when he thought of converting the restaurants' paper menus to a digital app, which is far more accessible and easier to use.

In a matter of 9 months, the company grew to become the largest restaurant directory in Delhi and later expanded to other cities due to its success. By 2012, Zomato had started expanding internationally to countries like the UK, South Africa, Qatar, Sri Lanka, South Africa, New Zealand, Brazil, etc. During this course, the company had to change its name since its last four letters of ‘Foodiebay’ coincided with ‘eBay’ ; the company name was changed to Zomato in 2010 to avoid any legal issues.

In 2015, the company forayed into the food delivery business and went on to launch Gold in India, which was a subscription product under which subscribers would get access to complimentary food and drinks. Zomato also launched Hyperpure , which directly works with Farmers to improve the quality of food produce and supply fresh produce to restaurants. The company now views its business as a combination of three key large pillars: Delivery , Dining Out, and Sustainability.

Zomato - Business Model

During the initial phase of the company, Zomato used to scan the menu of the restaurants and keep it on the site, and the menu was received by people. It still follows the same formula but has also added other services to its operation. The business model of Zomato is quite different from that of other food delivery such as Swiggy and Foodpanda. The key partners of Zomato are Uber and London & Partners, which could launch Zomato in the UK within expected timeline.

While the key resource of the company is that it has a large database of restaurants across 10,000 cities in 24 different countries , the business model is based on providing local restaurant search services, collecting data on food menu contacts, and providing relevant information to their customers. The main channels for Zomato are mobile applications and its website. The target audience of the company is the users who try to find local restaurants of various cuisines and restaurants who want their name to reach a large number of people.

Zomato also caters to customers who prefer home delivery; it helps out database and market research of companies . At the same time, the online service is built with a mandatory rating mechanism. Zomato's business model has revolutionized the food industry by incorporating various restaurants and making it convenient for people to find restaurants, provide feedback, and food business industries by incorporating various listings and availability according to their choice of cuisine.

How is Zomato Profitable when Swiggy and Dunzo are Burning Money

Zomato - Revnue Model

Zomato, in itself, does not offer the products to customers, but the revenue model of Zomato is massive. Zomato is not just a food business ; it is also in the advertising business . Zomato's business has two parts: one is the delivery business, and two is that they are in the advertising business. Today, Zomato has multiple revenue channels besides online ordering, which most consumers would be familiar with.

Restaurant Listings and Advertising

Zomato first started out as a restaurant search and rating service. This brought in the advertising revenues from restaurants who joined the platform. They further extended this feature to food delivery and restaurant reservations; for this, Zomato charges commissions from restaurants that want to be placed on the feed. Advertising is Zomato's major source of revenue . The restaurants can promote their banner on the site in order to get better visibility and appeal to a large section of the audience via Zomato.

Food Delivery

Through the food delivery business, Zomato charges a commission to the restaurants on the basis of orders . The company earns through restaurants that pay a commission for each delivery, which is then split among the delivery partners and the company. Zomato imposes a commission ranging from 20% to 25% on each order made at a specific restaurant, with potential variations in commission rates from 5% to 7% in certain regions. However, online food delivery only contributes a low percentage of income compared to other revenue streams because of the huge competition and the need to provide deep discounts etc.

Subscription Programs

The next major source of revenue for Zomato is a subscription fee. Restaurants pay a certain fee monthly; in return, Zomato offers them the analytical tools . Zomato has a huge number of databases that know what a customer wants to eat, where he/she wants to eat, and what the consumers are searching for, and it is given to restaurants, which helps them know about all this information through the cookies. It has a tool called Zomato Order that is given to restaurants, which helps them know about consumers' interests. The restaurants then use this tool to flash their discount offers on food.

Live Events

Zomato has forayed into the events space by partnering with restaurants and creating limited events. By which they made a sale through the price of the tickets. Zomato recently introduced Zomaland and entered the live event market in 2019 . Zomato charges users an entry fee to attend Zomaland, where, besides food, they can witness live musical performances and other acts. Zomato also organized an entertainment carnival in 2018 in Delhi, Pune and Bengaluru , where more than 100 thousand people showed up.

White Label Access

The next source of revenue is app development. Zomato launched a service called Zomato Whitelabel, under which they give offers to restaurants to develop customized food delivery apps . It also works with cloud kitchens and restaurants for consultancy services . Zomato works with selected restaurant operators to help in identifying locations for expansions at a minimal fixed cost but with increased options for the user. It provides the requisite licenses and operational enablement for such restaurant partners.

Zomato Kitchens

Zomato also provides kitchen infrastructure services to select restaurant operators; it works with entrepreneurs to set up and operate Zomato kitchens under various other labels. This helps entrepreneurs fund restaurants in the right location with an investment of Rs. 35 lakhs. It also claims to offer returns in the range of Rs. 2 lakh to Rs. 4 lakh per month to the investors and has so far completed more than 180 affiliated kitchens.

Zomato Gold

Zomato Gold is a premium subscription service offered by Zomato, providing members with exclusive dining benefits. Subscribers enjoy complimentary dishes or drinks at partner restaurants, making dining out a more rewarding experience. The service aims to enhance the dining lifestyle by offering special privileges and discounts at a wide range of top-rated eateries. Zomato Gold caters to food enthusiasts seeking unique culinary experiences while enjoying cost-effective perks. It has become a popular choice for those who appreciate both quality dining and savings.

Zomato - Value Proposition

Zomato's business model offers a variety of value to its customers . Zomato's revenue model focus has been on creating something new and extra that the customers cannot get anywhere else. Zomato is a one-stop shop for dinners and offers a way for restaurants to differentiate themselves. Restaurants have an option to create differentiation by keeping the listing updated, responding to criticism positively and also by being accountable for their action.

Zomato, in line with its business plan , believes in creating value for its customers to sustain its business operations. The company endeavours to bridge the gap between customers and restaurants by providing efficient technology applications, which, as outlined in the business plan, has played a crucial role in reducing delivery times and enhancing overall service quality.

What is Zomato?

Zomato is an online platform that offers food delivery and helps users discover restaurants with various dining options available.

What is Zomato's business model?

Zomato operates on a commission-based model, charging restaurants a percentage fee for orders through its platform. Revenue is generated via subscription services, including Zomato Gold, which grants exclusive dining benefits.

What is the revenue of Zomato?

Zomato's revenue is ₹7079 Crores (2023).

How to contact Zomato for business?

You can contact Zomato through email to start a business with them.

What is Zomato for business apps?

The Zomato for Business app is for business owners. It is an interface with powerful features to get the most out of your Zomato listing.

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How Zomato Works, Zomato Business and Revenue Model Explained

Table of Contents

What is zomato & how did zomato start, aggregator model:, delivery as a service model:, zomato gold subscription model:, hyperpure by zomato:, advertising and promotions model:, a step-by-step guide: how zomato works for restaurants and customers, understanding the zomato business model: how does it work, zomato business model canvas, zomato’s revenue streams: how does the food delivery giant make money, zomato for businesses: the ultimate guide to benefits and opportunities, navigating the changing tides of the food delivery industry: challenges faced by zomato.

Chances are, you have used Zomato at least once. But do you know how this popular restaurant discovery and food delivery platform works behind the scenes? This blog post will deeply dive into the Zomato Business Model , revenue streams, and operations. From its humble beginnings as an online menu card to its current status as one of India’s most successful startups with global reach, we’ll explore everything that makes Zomato tick! So sit back, relax, and get ready to learn all about How Zomato Business Works ! It currently operates in 24 countries. The company provides menus, user reviews, and restaurant contact information.

Zomato is an Indian multinational restaurant aggregator and food delivery company. It was founded by Deepinder Goyal and Pankaj Chaddah in 2008.

In July 2008, Deepinder Goyal and Pankaj Chaddah, both graduates of the prestigious Indian Institutes of Technology (IIT), joined forces to establish Zomato, initially known as Foodiebay. The inception of Zomato stemmed from Deepinder’s observation that his colleagues often struggled with paper menus while ordering food from various restaurants. Recognizing the need for a more convenient and accessible solution, they embarked on transforming restaurant menus into a user-friendly digital platform.

Within a mere nine months, Zomato emerged as Delhi’s premier dining directory, swiftly expanding its reach to other cities fueled by its initial success. By 2012, Zomato embarked on an ambitious international expansion, venturing into countries such as the United Kingdom, South Africa, Sri Lanka, New Zealand, Brazil, among others. However, to avoid potential legal conflicts arising from the resemblance of its former name ‘Foodiebay’ to ‘eBay,’ the company underwent a rebranding in 2010, officially adopting the name ‘Zomato.’

In 2015, Zomato diversified its portfolio by venturing into the food supply business and introducing Gold in India, a subscription-based product offering complimentary food and beverage items to subscribers. Additionally, Zomato launched HyperPure, a venture aimed at collaborating directly with farmers to enhance the quality of food products supplied to restaurants, ensuring freshness and sustainability.

Funding History:

Zomato has garnered a staggering $909.6 million from various investors throughout its journey. Notably, the leading investor is Info Edge, with significant contributions from Ant Financial, Delivery Hero, Shunwei Capital, Vy Capital, and several others, contributing to Zomato’s global prominence.

Let’s delve into some key milestones in Zomato’s funding history:

• November 2013: Secured $37 million from Sequoia Capital and Info Edge India.
• November 2014: Raised $600 million from Vy Capital, Info Edge, and Sequoia Capital.
• September 2015: Raised $60 million from Temasek and Vy Capital.
• October 2018: Received $250 million investment from Chinese company Alibaba.
• Additional funding of approximately $150 million was raised from Ant Financial in 2018.
• Operational Insights:

Zomato boasts a workforce of over 5,000 employees across various roles and pay scales. Monthly user base: 80 million users. Availability in multiple languages including Spanish, Czech, Turkish, Italian, and Vietnamese. Presence in 24 countries. Remarkably, Zomato adds a new restaurant to its platform every 30 seconds. Zomato’s relentless innovation and strategic expansion have solidified its position as a global leader in the food technology industry, catering to millions of users worldwide with unparalleled convenience and efficiency.

Types of Zomato Business Models

Zomato operates using several business models to serve its diverse customer base and meet various needs within the food industry. Here are the key types of Zomato business models:

Zomato acts as an aggregator platform, partnering with restaurants, cafes, and eateries to list their menus, prices, location details, and customer reviews. Users can browse these listings, place orders for delivery or pickup, and make payments through the Zomato app or website. Zomato earns revenue through commissions from restaurants for facilitating orders and transactions.

In addition to aggregation, Zomato provides delivery services to partner restaurants through its logistics network. This model involves managing the entire delivery process, from order fulfillment to doorstep delivery. Zomato charges delivery fees to restaurants for using its delivery services, offering a seamless end-to-end solution for food delivery.

Zomato Gold is a subscription-based program that offers exclusive deals, discounts, and complimentary items at partner restaurants to subscribers. Users pay a subscription fee to access these benefits, while restaurants benefit from increased customer traffic and loyalty.

HyperPure is Zomato’s venture into the food supply chain business. It works directly with farmers and food producers to source high-quality ingredients and supplies them to restaurants. This ensures fresh and premium food products for Zomato’s partner restaurants, enhancing the overall dining experience for customers.

Zomato also generates revenue through advertising and promotional services for restaurants. It offers marketing tools, sponsored listings, targeted advertisements, and promotional campaigns to help restaurants increase visibility, attract customers, and boost sales.

These diverse business models collectively contribute to Zomato’s success as a comprehensive food technology platform, catering to both consumers and businesses in the food industry.

1 Search for Restaurants: Zomato’s home page allows users to search for restaurants in their area by entering their location, cuisine preferences, or restaurant names. Users can also browse through popular restaurants in their area, top-rated restaurants, or restaurants offering discounts or deals.

2 View Restaurant Details: Zomato provides users with detailed information about the restaurant once a restaurant is selected. Users can view the restaurant’s menu, pricing, photos, location, and user reviews. The platform also provides information about the restaurant’s operating hours, contact details, and delivery options.

3 Place an Order: If a user wishes to order food from the restaurant, they can do so directly through Zomato. The platform allows users to select items from the restaurant’s menu and add them to their cart. Users can customize their orders by specifying additional requirements, such as dietary preferences or allergy concerns.

4 Payment: After placing the order, users can proceed to payment. Zomato supports various payment methods, including credit and debit cards, net banking, and digital wallets. Users can also opt for cash on delivery in some cases.

5 Delivery: Once the payment is confirmed, the restaurant prepares the order and sends it to the user’s address. Zomato’s delivery partners then pick up the order from the restaurant and deliver it to the user. Users can track their order status in real-time through Zomato’s app or website.

6 Review: Users can provide feedback about their experience with Online Food Delivery Apps in India . Zomato encourages users to rate the restaurant and leave detailed reviews to help other users make informed decisions.

Besides Online Food Ordering , Zomato also offers a restaurant discovery platform where users can browse and review restaurants in their area. The platform also provides restaurant owners with tools to manage their business listings, menu, and customer reviews.

Zomato’s business model is based on providing a comprehensive and convenient online platform for users to search for restaurants, view menus, read reviews, and make reservations. The company earns revenue through advertising and subscription fees from restaurants.

1. Restaurant Discovery: Zomato’s platform allows users to discover new restaurants based on location, cuisine preferences, and other criteria. Restaurants can create listings on the platform for free, but they can also pay to have their listings featured more prominently. This is a significant source of revenue for Zomato.

2. Online ordering and delivery: Zomato offers online ordering and delivery services, allowing users to order food from participating restaurants. Zomato charges a commission fee for each order, typically around 10-15% of the total order value. This is another significant source of revenue for Zomato, and the company has been expanding its delivery services in recent years.

3. Advertising: Restaurants can also pay to advertise on Zomato’s platform, which includes banner ads and sponsored listings. Zomato uses targeted advertising to reach specific audiences, such as users interested in a particular cuisine or type of restaurant. This is another important revenue stream for the company.

4. Premium subscription services: Zomato offers premium subscription services to restaurants, which provide additional features and benefits such as enhanced visibility and analytics. Restaurants can pay a monthly or annual fee to access these services. This is a relatively new revenue stream for Zomato, but it has grown in popularity as more restaurants looking to improve their online presence.

5. Data insights: Zomato collects and analyzes user behavior and performance data to provide insights to restaurants and other industry stakeholders. This data is valuable to restaurants as it can help them optimize their menus, pricing, and marketing strategies. Zomato also uses this data to improve its platform and services.

Zomato Business Model generates revenue through multiple channels, including advertising, online ordering and delivery, and premium subscription services. Zomato has become a leading player in the online food industry by providing services to users and restaurants. The company’s focus on technology and data has also helped it stay ahead of the competition and continue to grow its business.

Zomato’s revenue model is based on multiple streams, including:

• Commission on Online Orders: Zomato earns commissions on every order placed through its platform. This commission is typically around 10-15% of the total order value. This revenue stream has become increasingly important for Zomato as it has expanded its delivery services.
• Premium Subscription Services: Zomato offers premium subscription services to restaurants, which provide additional features and benefits such as enhanced visibility and analytics. Restaurants can pay a monthly or annual fee to access these services. This revenue stream is based on recurring subscription fees.
• Data Insights: Zomato collects and analyzes user behavior and performance data to provide insights to restaurants and other industry stakeholders. This data is valuable to restaurants as it can help them optimize their menus, pricing, and marketing strategies. Zomato also uses this data to improve its platform and services. This revenue stream is based on data licensing fees.
• Events and Reservation Fees: Zomato also earns revenue from hosting events and providing restaurant reservation services. This revenue stream is based on event fees and reservation fees.

Overall, Zomato’s revenue model is based on generating revenue through multiple channels, including online orders, advertising, premium subscription services, data insights, online ordering and delivery fees , and events and reservation fees.

Here are some benefits of using Zomato for businesses:

Increased Visibility: Zomato has a large user base, and by listing your business on the platform, you can increase your visibility and reach potential customers who may not have heard of your business before.

Increased Foot Traffic: Zomato can help drive traffic to your restaurant by featuring your business in search results and recommendations to users looking for restaurants in your area.

Reviews and Ratings: Zomato allows customers to leave reviews and ratings of your business, which can provide valuable feedback to help you improve your offerings and service. Positive reviews can also help attract new customers.

Targeted Marketing: Zomato offers targeted marketing options, allowing you to reach specific audiences based on location, cuisine, and price range.

Cost-effective Advertising: Advertising on Zomato can be a cost-effective way to reach potential customers, as the platform offers a range of advertising options at different price points.

Analytics and Insights: Zomato provides businesses with analytics and insights to help them track their performance on the platform, including data on page views, user interactions, and customer demographics.

Overall, Zomato can be a valuable tool for businesses in the Online Food Delivery Industry looking to increase their visibility, attract new customers, and improve their offerings and service.

✅ Want to Know? The Cost Estimation for Developing App Similar to Zomato

The platform has faced several challenges over the years. Below are some of the significant challenges faced by Zomato:

• Intense Competition: Zomato operates in a highly competitive market, with several players, including Swiggy, Uber Eats, and Foodpanda. The intense competition puts much pressure on Zomato to keep innovating, offer better services, and keep prices low to retain and attract customers.
• Logistics and Delivery Challenges: One of the primary challenges faced by Zomato is the logistics and delivery of food. The company has to ensure that food is delivered on time and in good condition. Delays and mishandling can lead to dissatisfied customers, negative reviews, and loss of business.
• Managing Quality Standards: Zomato works with numerous restaurant partners, and it can be a challenge to maintain consistent quality standards across all partners. Ensuring food is prepared, served correctly, and adheres to hygiene and safety standards is essential for customer satisfaction and brand reputation.
• Dependence on Third-party Vendors: Zomato relies on third-party vendors for many of its operations, including logistics and payment processing. This dependence can create challenges, including disruptions in the supply chain and increased costs.
• Regulatory Challenges: The food delivery industry is heavily regulated, and Zomato has to comply with various regulations, including food safety standards, taxes, and labor laws. Complying with these regulations can be challenging, time-consuming, and costly.
• Managing Growth: Zomato has experienced rapid growth, expanding into new markets and adding new services, such as online ordering and table reservations. It can be challenging to manage this growth and ensure the company maintains its brand identity and customer base.
• Data Privacy and Security: Zomato collects and stores sensitive customer information, including payment details and personal information. Ensuring this information is kept secure and protected from data breaches is crucial to maintaining customer trust and complying with data protection regulations.

In conclusion, while Zomato has become a household name in the Food Delivery Apps in India & USA and the restaurant discovery industry, it faces various challenges. These challenges require constant attention and innovation to ensure the company stays ahead of its competitors and meets its customers’ needs.

Zomato is a revolutionary food delivery service that has overtaken the world. It has become one of India’s most successful tech companies by leveraging its deep understanding of customers and creating an efficient online platform. Zomato’s Business and Revenue Model is simple yet effective and has enabled them to build the largest food-ordering network in the country. With its continuously expanding reach, Zomato will remain dominant in this space for many years.

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Zomato Business Model | How does Zomato make money?

Company: Zomato Founder & CEO:  Steve Easterbrook Year founded: 2008 Headquarter:  Gurgaon, Haryana, India. Number of Employees (2019):  5000+ Type: Private Monthly Active Users (2019) : 70Million+ Valuation (Oct 2020): $2 Billion Annual Revenue (FY2020): $394 Million Loss |Net income (FY12020): -$293 Million

Products & Services:  Restaurant Directory | Online food guide | Food delivery Competitors: Yelp | Zagat | Open Table | Grub Hub | Swiggy | Uber eats | Qraved | Chope | Redfoodie | DoorDash | EatStreet | Restorando | MenuEgypt | Forkly | Delivery Hero

Table of Contents

Introduction to Zomato

Zomato has proven to be a phenomenal foodie platform, providing a convenient way to review restaurants, feedbacks, listings in (now) over 24 different countries. The platform is even capable of giving insightful analytics for the restaurant to help route their business to exponential growth.

Zomato is a restaurant-café search and discovery service platform, idealized in 2008 by Deepinder Goyal and Pankaj Chaddah . The brand was originally known as Foodiebay till November 2010.

The platform is ideal for both food lovers and restaurant owners. Users can also view pictures and menus for restaurants that do not have a website of their own.

Any restaurant owner who wishes to list a menu can, regardless if the restaurant has an online presence or not. The platform allows restaurant owners to increase their restaurant business visibility through listing advertisements and special promotional menus through the Zomato platform.

The Zomato platform is designed with smart search engine filters, meaning that it will search for only relevant restaurants as per to the searched relevant keyword.

Zomato acts as the key-bridge to providing relevant information on potential restaurants for users that searches with keywords or keyphrases relevant to the restaurant.

Zomato has grown rapidly from a small food review website to a multinational giant serving over 70 million people every month, both in the food and entertainment business. It is now gearing up for a public listing in the first half of 2021 and focused on raising over $146.5 million in a Series J financing round. In October 2020, it raised close to $52 million from Kora Investments and $5.1 million from Pacific Horizon Investment Trust, which had previously invested $5 million in March 2020. Zomato has already raised over $270 million in 2020 alone from major investors like Tiger Global, Temasek, and Ant Financial. [ 1 ]

The following is a compilation of Zomato Business Model Canvas .

Business Model Canvas: Zomato

1. customer segments.

Zomato has three customer segments:

Users – Zomato platform is explicitly designed for users to find and locate restaurants in a range of various cuisines. Zomato is perfectly geared for customers who prefer home delivery .

Local Businesses – The platform further stands significant for restaurants who want to promote the business or restaurant name to help reach the target audience . Zomato was built on market and trend research. Marriot International is one of the latest global hotel chains to join Zomato’s long list of customers. Zomato will work alongside Marriott on Wheels to enhance its corporate outdoor catering services and home delivery services in partnership with close to 30 hotels across all major cities in India. [ 2 ]

Reviewers (content contributors) – these are active reviewers, who add reviews and photos of local restaurants or businesses on Zomato platform. 

2. Value Propositions

Zomato is an exceptional platform for diners to review a wide range of different restaurants in their serving area. At the same time, it allows restaurant owners to differentiate themselves in the market place, even if they are the owners of more than one restaurant.

 Zomato further serves as a bridge between restaurant owners and hungry customers.

Zomato provides a comprehensive pricing model for the food delivery services , providing insightful details to the overall cost, duration, etc. of the delivery order.

Additionally, Zomato provides membership and loyalty program to build loyal customer base. For example, Zomato Gold membership and Piggy Bank loyalty program ensure that customers get additional value for their money. In 2020, Zomato moved all Gold members to the newly unveiled Zomato Pro. Users on Zomato Pro get a variety of features and upgrades like instant food delivery services and a money-back guarantee from newly registered hotels, bars, and lounges. [ 3 ]

Super excited to introduce Zomato Piggybank – https://t.co/I4xs5NHHwd pic.twitter.com/h1Hrxhqy6t — Deepinder Goyal (@deepigoyal) July 10, 2018

3. Key Partners

• Zomato has built an alliance with Uber Taxi for users to book a ride to the restaurant that they plan to dine at.
• The clever innovation eliminates users from dealing with two different apps. Especially when customers are trying to review, pick, and find the best place to dine, all in a smooth, simple way.

London & Partners

Zomato has built an alliance with London & Partners to help expand their virtual foodie presence in the European regions. London & Partners were responsible for aiding Zomato with:

• Finding an office location in London.
• Assistance with the staff hiring process
• Insightful advice on salaries
• Management recruitment
• Work placements
• Market research
• Advising on accountants and legal procedures, policy, and compliance.

Other business partners – These are electronic payment companies like Visa, PayPal .

Seasonal partners – Zomato partners with companies from time to time, particularly during the holidays. For instance, Zomato partnered with the Singapore Tourism Board to stage an elaborate digital event called Zomaland in June 2020. The virtual event enables the tourism organization to engage Indian consumers successfully while maintaining social distance. [ 4 ]

4. Key Activities

The business model is incomplete without analyzing the key activities of a company. Although Zomato’s primary purpose was to make restaurant hunting exceptionally easy and convenient, it also has various key activities which are listed as follows.

• Manage Network effects : As aforementioned, Zomato provides local restaurant search service to the users, currently operating in 24 countries. It provides details and reviews of restaurants. The information includes data about the food items, contact info, and address of the restaurants.
• Manage and Utilize Advertising : Zomato has an enormous user database which it uses for advertisement. The company makes the most of its solid presence and brand popularity by posting advertisements for various restaurants, generating a considerable amount of revenue.
• Drive Customer Experience Initiatives : Zomato initiates a lot of activities to improve its customer’s experience and keep updating its features as per the trends. In April 2020, it expanded its online food aggregator platform to include contactless dinin g features that allow diners to scan a QR code on the table to check the menu, then place orders and make payments using the app. The feature reduces interaction and contact between staff and diners when they visit restaurants. [ 5 ]
• Enhancing Brand Image : Zomato maintains its brand image by providing a sense of community for foodies and facilitating people the exact information about “What to Eat and Where to Eat.”
• Expand and Diversify their service offer:
• Online food delivery and subscription : Zomato was not a delivery service at the beginning, but eventually it launched it’s delivery and subscription feature as well. However, the section does not generate much revenue for the company as it faces fierce competition from Swiggy .
• Consultancy to Restaurant Owners : Zomato has a massive database of users, revealing many significant facts about their behaviors, likes, and dislikes. Zomato offers data consultancy services to many eateries and new restaurants in town.  
• Zomato Whitelabel: Zomato also provides service for restaurants to develop their own app through a platform known as plug and play.

5. Key Resources

Zomato has a massive database on restaurants, café, and similar business places across cities in 24 countries. Zomato aims to build new alliances and capture the global market.

High-Quality Database – Massive Database of restaurants and businesses

Employees – that are working diligently to extend its outreach, apart from the current 24 countries.

Zomato Platform

A community of content contributors or reviewers

Zomato brand reputation

Funding Partners – Zomato were able to raise millions through funding channels. Top investors include Ant Financial, Sequoia Capital, Temasek Holdings, Info Edge, and Vy Capital. In the recent past, other investors have joined Zomato, including Asia Growth Fund, Steadview Capital, Luxor Capital Partners, Lugard Road Capital, and ASP India LP. The investors are part of a  $525 million financing round, which is estimated to reach around $600 million. Currently, India’s company regulator values Zomato at $3.4 billion. Zomato is also set to raise more capital once it debuts for the 2021 IPO. It seeks to issue 34,873 class J7 CCPS shares to the investors at Rs 300,235 per share to raise Rs 1,047 crore ($141 million). [ 6 ]

Cloud and Zomato Kitchens – It provides kitchen infrastructure services by partnering with entrepreneurs to set up and operate Zomato Kitchens in selected restaurants under different labels. Entrepreneurs first have to find restaurants in the right location that they wish to fund, and then Zomato invests INR 35 Lakh or more. Zomato has already set up over 180 affiliate kitchens with its partners and eliminated exclusivity for cloud kitchens, which allows its restaurants to list on rival platforms such as Swiggy . [ 7 ]

6. Channels

Zomato offers its platform accessible through multiple access points:

Application (smartphone or tablet)

Zomato Official Website

Food Porn (Zomato has also created a site specifically for the food porn industry, providing an exclusive photo of exotic foods from around the world)

7. Customer Relations

Convenient Self Servicing : Zomato provides its customers independence to make the right choice, providing all the options and information which leads to comfortable self-servicing.

Up to Date Ratings and Reviews : Users enjoy Zomato’s transparency in their ratings and reviews, providing authentic information to users about the quality and service of restaurants. It started testing a new feature in October 2020 that allows consumers to post their reviews of restaurants , photos of their favorite foods, and a short story on the app for their friends and food bloggers to see directly from the app’s feed. [ 8 ]

Customer Engagement Activities : Zomato initiates customer engaging activities like offering coupons and tickets.

Active Communication Channel and Customer Support : Zomato has a reliable customer support service platform and maintains effective communication with its customers.

8. Zomato’s Cost

The total cost of Zomato’s FY18 was $80 M, which has increased to $500 M in FY 19 . An immense shift indicating how much the business has expanded.

The annual cost of $ 500M is utilized in the following operations.

• Platform development

Zomato invests graciously on improving its online presence, brand value by enhancing its online portal, customer service, and enhanced marketing operations.

• Branding and advertisement cost

Zomato launches a lot of various marketing campaign top maintain its popularity, which of course requires a great deal of investments. In 2019, it introduced the Zomato Premier League with a diversified kitty of TV ads and offers like predicting the winners in particular matches to get further discounts. ZPL’s gamification and offers appealed to the foodies watching cricket and attracted over 4 million participants within the first three weeks of the IPL in 2019. [ 9 ]

• Credit card processing fees

Zomato pays for its credit card transactions operations as well.

• Legal and accounting fees

Zomato pays other legal fines and payments for acquiring different licensees and taxes.

• Office maintenance cost 

Zomato operates from 24 countries including Portugal, India, United Arab Emirates, Qatar, Turkey, Indonesia. The company bears office maintenance cost for all of its offices.

• Employee’s salary

Zomato has over 5000 employees overall with different pay scales. 

9. Zomato’s Revenue

Zomato’s revenue similarly increased in FY19 compared to FY18.  In FY19 , Zomato’s revenue is $206 M – a total of three times more than the FY18 (which was $68 M )

How does Zomato make money?

Now let’s see how Zomato makes money based on a few high-level categories:

The delivery service, dine out membership, advertisements, promotional deals, exclusive offers that Zomato offers are the primary revenue generators for Zomato.

• The commission from delivery transactions constitutes about 75 % of the total revenue for FY 19.
• Zomato delivery services earned $38M in FY18, while in FY19, the revenue from the services increased, generating almost $155M , indicating 4 times more growth than the last year.

Dining Out  

• Zomato has partnered with restaurants to provide complimentary food and drinks to its subscribed members. The membership is called as Zomato’s Gold membership program . The annual membership fee is Rs   1,199 , and the program has over 1 million active subscribers. All subscribers under the Gold program were upgraded on August 1, 2020, to its new subscription package called Zomato Pro that offers to dine out privileges and discounts on the best restaurants. As of July 2020, 50% more partner restaurants had already signed up on Zomato Pro than on Zomato Gold. [ 10 ]
• The dining out section also saw an increment in sales with $30 M in FY18, while $49M in FY19.

Ticket Sales

• Zomato also sells tickets for several of events and shows. Zomato earns a commission through these types of sales and deals. Zomaland is one of the most successful live events organized by Zomato, which attracted over 100,000 visitors when it debuted in 2018 across Delhi, Bengaluru, and Mumbai. In 2019, it expanded to over 10 cities and enticed major partners like the Singapore Tourism Board. In 2018 and 2019, Zomato increased its revenue by charging attendees entry fees but was forced to live stream virtual Zomaland@home carnival in June 2020 on its app and the Zomaland pages on Facebook, Instagram, TikTok, and Helo to avoid gatherings and interactions. [ 11 ]

Consultation Services

• Zomato also offers consultation services and data analytics services for clients, prospects.

Sustainability:

• In the past few years, Zomato has shifted its focus on being a transactional company instead of relying a hundred percent on its advertising revenue. The company is trying to balance its both features the delivery and the dine out which has generated a revenue of $2M in the sustainability department. In the early years, more than half of its revenues came from ad sales that grew from $38 million in 2017 to $46 million in 2018, representing 62% of its total revenues in FY18. Even though Zomato continues to charge commissions for listing and promoting restaurants on its app’s feed, it stopped considering ad sales as a standalone revenue stream. In 2020, Zomato considered reducing its commission charges by 5% after it received a request from the hotel association. [ 12 ]

Final Thought

Zomato happens to be one of the most successful platforms that was originally launched in India. Today it’s serving platforms and operations have extended to over 21+ countries and are determined to continue to grow its customer base.

Zomato is working on many new business endeavors. However, this doesn’t limit Zomato from further implementation and improvement to their existing platforms and software applications. 

 References & more information

• Bhallah, T. (2020, Nov 6). Zomato to raise $146 mn as it preps for IPO in 2021 . Live Mint
• PTI (2020, June 12). Marriott enters into a pact with Zomato to expand the home delivery service . Deccan Herald
• Flick (2020, July 5). Zomato Pro: New Features like ‘Money-Back Guarantee’ & More . Flick-on-Click
• Editor (2020, June 4). Singapore Tourism Board Partners with Zomato to bring a virtual weekend festival experience . Indian Newz
• Tandon, S. (2020, April 18). Zomato plans contactless dining post-covid-19 . Live Mint
• Rai, S. (2020, September 11). With food delivery bouncing back, Zomato plans IPO next year . The Print
• Shrivastava, A. (2020, Feb 05). Zomato lets go of exclusivity for cloud kitchens . Economic Times
• Harsh, U. (2020, Oct 20). Zomato pilots feature to post stories and reviews through the feed . Entrackr
• Pragati, B. (2020, April 20). A guide to the winning Zomato marketing strategy . Talk Walker
• Nandi, T. (2020, June 30). Zomato Gold is now Zomato Pro: Here are the extra benefits for customers . Live Mint
• Dash, S. (2020, June 2). Zomato’s popular carnival Zomaland goes online as large gatherings remain banned due to Covid19 . Business Insider
• FE Bureau (2020, October 14). Hotel association writes to Swiggy, Zomato, to cut commission charges on takeaway services . Financial Express

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

A management consultant and entrepreneur. S.K. Gupta understands how to create and implement business strategies. He is passionate about analyzing and writing about businesses.

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How Zomato Works: Online Food Delivery App Business Model Explained

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“What’s the rating on Zomato?” has turned into the default reply to “Should we go to this restaurant?” in numerous countries worldwide. This change didn’t happened overnight; the team at Zomato is behind it for almost a decade now. Let’s see how their success looks like:

Zomato is an on-demand food delivery platform having a presence in more than 23 countries . It empowers individuals to get food from local eateries and restaurants delivered at their doorstep for a small fee. The platform also provides information about close-by restaurants, their menu cards, average cost, ratings and reviews.

Zomato delivers food with the assistance of their human network. Much the same as Uber drivers, Zomato food delivery guys get an order on their cell phone and GPS is utilized by the organization to coordinate demand and supply in the shortest possible time.

Zomato’s unique business model has gotten a good measure of funding from investors and has helped the organization gain an extensive user base. Zomato was launched in the year 2008 with the name Foodiebay and in a short period , it has turned out as a gigantic success.

Zomato Stats and Facts: Funding and Major Milestones

• Launch Date: July 10, 2008
• Founders: Deepinder Goyal and Pankaj Chaddah
• Funding received by Zomato: $653.8M in funding over 11 rounds
• Annual Revenue: More than $46.6M
• Company Valuation: over USD 2 billion
• Active Users: Serves more than 50M users every month

How Does Zomato Make Money – Revenue Generation Model

Zomato just released its FY18 yearly report, and the numbers are looking truly strong. Zomato’s overall revenue was $74 million (Rs. 480 crores) in FY18, up almost 45% from $51 million a year ago. Zomato now makes money from different verticals. It has its original marketing business, and over the last couple of years, has been aggressively advertising its food delivery services as well. Recently, Zomato also launched two successful loyalty programs, Zomato Treats and Zomato Gold. Here are the means by which it earns money:

Also Read : A Complete Guide to Investing in “Soon to Be $200B” Online Food Delivery Industry

Advertising (62%)

Zomato started its business as a restaurant aggregator and still earns most of the revenues through its unique — advertising. Zomato gives restaurants, eateries, bars and pubs a chance to advertise on its platforms through sponsored listings, and earns the greater part its incomes through this channel. This contributes to a 62% share of its overall revenue in FY18. It was 78% in the year 2017 as shown by the stats given by Statista.

Food delivery (30%)

The company launched its food delivery services in 2015 and aggressively extended its food delivery services after then. In FY18 food deliveries present 30% of Zomato’s overall revenue, turning into the second biggest source of income for the organization.

Others (8%)

Zomato launched its excellent subscription program Zomato Gold in India in November 2017, after piloting it in UAE and Portugal. Zomato Gold crossed 26000 subscribers inside the initial seven-eight hours and in a split second turned into a hit among the clients in India. Zomato says that Zomato Gold now adds to 12% of its monthly revenue.

It implies that going ahead; Zomato Gold will probably turn into a noteworthy revenue contributor for the organization. Similarly, Zomato Treats was launched in April a year ago and offered individuals a free sweet when they ordered food from selected eateries. It contributes to 0.5% of its total revenues.

Going ahead, it looks like the greater part of revenue growth for Zomato could emerge out of its ordering business and membership services. Zomato as of now has most restaurants listed on its platform and is the go-to service for users to find new eateries. It probably understands that it had no headroom to develop its advertising revenues in this vertical.

And cleverly opened new revenue channels, and they are developing quick — while its advertisement business developed just 20% this year, its food ordering business became almost 60%. And, with its membership services developing quick with almost no competitor and half a million waiting list, Zomato could change its revenue profile drastically in the years to come.

Also Read: Food Delivery App Development: How Much an App Like Postmates Costs?

How Zomato Works?

Zomato has been effectively growing since 2008. Its upward graphs and success timeline is a result of its adequately creative business plan and a promising revenue generation strategy. Here is a clear picture of how it works:

1) It enables users to search through a rundown of restaurants and select their most loved food from their most loved cuisines via a website or mobile app .

2) Zomato is an astounding platform for restaurants to improve their market presence and grow their user database.

3) Users can see special offers and deals by skimming through the community on the channels.

4) Once the clients choose their order, Zomato gives them the leverage to pay using different mediums.

5) The request received goes directly to the Zomato delivery guys. Then goes to the specific restaurant.

6)  The restaurant then confirms the order and packs it according to the requirements given.

7) Zomato delivery personnel finish the last step by picking up the parcel from the restaurant and deliver it to the user.

8) Meanwhile, Zomato likewise provides restaurants an opportunity to show and promote their cuisines to a huge user base. Restaurants also pay to Zomato for featured listings.

9)  Zomato is a reliable partner for Restaurants hoping to grow their business by expanding their reach and users via online branding.

10) It has partnered with almost every one of the restaurants of the urban areas thus offering its clients a wide variety of food items.

11) Zomato has built up a rating framework which puts restaurants in an order based on their ratings and reviews. The clients rate the restaurants based on the quality of the food, look and feel of their ambiance and their experience.

12)  Its technology enhances the user experience by telling them the distance of a particular place from user’s area, average food price, delivery charge and estimated wait time for the order.

Key Takeaways from Zomato Business Model

There is a lot that food startups can learn from the success of Zomato.

A Flexible Business Model Is a Win

Zomato began as a restaurant’s menu listing platform that later on launched a mobile application to order food online and then it started advertising programs. With the evolving world, Zomato changed its business model as well. Recently, Zomato’s CEO said in a statement “Doing food delivery alone is not sustainable”. That means the company is always ready to evolve to reach new heights.

A Sustainable Business Model is a Win Win

Luring users with discounts may work in the beginning, however, is not a sustainable way of working. Revenue model plays a noteworthy role in deciding the destiny of a startup. To keep up net revenues a business should utilize extra income streams, (for example, advertisements, online ordering, and memberships) in addition to the essential income channel.

Focus on Customer Experience

Customer experience can make or break your business. Putting resources into it is always a great move. With online food ordering platforms, the customer’s desires vary. They expect their food to be delivered in minimum possible time. In this manner, a robust customer support should be set up to guarantee smooth customer experience.

Wrapping Up

Zomato story is inspiring in all angles for every entrepreneur. The essential reason behind its wonderful achievement is the conviction and the desire to explore new possibilities in various challenging stages.

Would you like to make an App like Zomato? Or you have a better idea? Connect with food delivery app development company and know how we can enable you to develop the next big thing!

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Humane yet subtle, Naiya is a girl full of ideas about almost everything. After earning a bachelor’s degree in computer science and engineering, she decided to merge her technical knowledge with her passion for writing – to accomplish something interesting with the fusion. Her write-ups are usually based on technology, mobile apps, and mobile development platforms to help people utilize the mobile world in an efficient way. Besides writing, you can find her making dance videos on Bollywood songs in a corner.

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Decoding the Business Model of Zomato: A 360-Degree Analysis

The food delivery industry has experienced a substantial transformation in the current fast-paced global landscape. Zomato, a leading entity in this industry, has significantly transformed how we place food orders and reimagined the entire dining experience. This article aims to thoroughly analyse the business model of Zomato, covering various aspects from multiple perspectives. By comprehensively analysing its diverse elements, we can better comprehend Zomato’s operational strategies and sustained success within the fiercely competitive food delivery industry.

1. Online Platform for Restaurants and Customers: The Core of Zomato’s Business Model

The core of Zomato’s business model is centred on offering a robust online platform that serves as an intermediary between restaurants and customers, facilitating seamless connections and transactions. Zomato is a digital marketplace enabling restaurants to present their menus, high-quality images, comprehensive descriptions, and customer reviews. The interface of this platform is designed to be user-friendly and provide a seamless connection with customers. It offers a wide range of dining choices to enhance their experience. The business model of Zomato is based on establishing relationships with restaurants to generate commissions. These commissions are calculated as a percentage of the total bill, incentivising restaurants to list their services on the platform.

2. Revenue Generation through Commissions: Zomato’s Primary Income Source

The primary source of revenue for Zomato is its commission-based business model. The commission is applied when customers place orders through Zomato. This mutually advantageous arrangement incentivises restaurants to collaborate with Zomato, allowing them to tap into a broader customer demographic and experience a boost in sales. The business model of Zomato is based on a commission-based revenue model, which has demonstrated significant success.

3. Food Delivery Services: Expanding the Revenue Horizon

The expansion of Zomato into the food delivery sector is a crucial element of its overall business strategy. Customers can now conveniently place food orders from their preferred restaurants through the Zomato platform. In addition to the earnings from commissions, Zomato levies a delivery fee for its services. Implementing Zomato Pro enhances the value proposition by providing exclusive discounts to subscribers, resulting in a mutually beneficial arrangement for both Zomato and its users.

4. Advertising and Promotions: Driving Visibility and Additional Income

Advertising and promotional services play a crucial role in increasing the visibility of Zomato and driving its revenue growth. Restaurants can choose sponsored listings, banners, and featured content to differentiate themselves in a highly competitive marketplace. Zomato generates additional revenue by providing promotional tools, increasing restaurants’ visibility to a broader customer base. This aspect of the business model of Zomato exemplifies its function as a proficient marketing platform.

5. Data Monetization: Leveraging Information for Profit

The extensive data repository of Zomato, which encompasses customer preferences, ordering habits, and restaurant performance metrics, possesses significant value. The company utilises data analytics to provide actionable insights to its restaurant partners. Zomato uses this data to support restaurants in optimising their menus, pricing, and marketing strategies, ultimately improving their overall performance. Data monetisation is a strategic component of the business model of Zomato, serving as a significant source of revenue and driving the success of its partner restaurants.

6. Diversification into Grocery Delivery: Expanding the Revenue Portfolio

Zomato expanded its range of services in response to evolving consumer preferences by venturing into the grocery delivery sector. By utilising its pre-existing logistics network and technology infrastructure, Zomato now offers customers the convenient ability to place grocery orders from nearby stores. Implementing strategic diversification not only allows Zomato to enter the expanding online grocery market but also introduces an additional source of revenue. This enhances the resilience and adaptability of the business model of Zomato.

7. Cloud Kitchen Initiatives: A Strategic Culinary Move

The business model of Zomato encompasses the operation of cloud kitchens, commonly known as dark kitchens or virtual kitchens. These specialised kitchens are dedicated solely to online food delivery and do not offer any dine-in options. Zomato strategically invests in and manages its cloud kitchens through collaborative partnerships with renowned restaurant brands. This initiative guarantees a dependable food supply and enables Zomato to explore various culinary concepts, strengthening its competitive advantage in the food delivery industry.

8. Expansion into Event and Dining Reservations

Zomato’s growth strategy encompasses expanding into event reservations and enhancing dining experiences. Customers can conveniently reserve tables at their preferred restaurants using the Zomato application, a comprehensive platform catering to all their dining requirements. Zomato implements a fee structure for restaurants utilising its reservation service, enhancing its revenue model.

9. International Expansion and Global Partnerships

The business model of Zomato extends beyond a singular market. The company has successfully expanded its operations on a global scale by establishing strategic partnerships with various international restaurants and chains. This expansion enables Zomato to access a broader range of customers and generate supplementary revenue by offering global cuisine options to its users.

This analysis comprehensively examines Zomato’s business model, delving into its fundamental elements, revenue streams, and strategic diversifications with meticulous attention to detail. The business model of Zomato is a highly efficient system that facilitates connections between restaurants and customers, all while optimising multiple revenue streams. Zomato has successfully implemented various strategies to monetise its platform, including commission-based earnings, food delivery services, advertising, data-driven insights, diversification into grocery delivery, event reservations, expansion into international markets, and establishing global partnerships.

Zomato has demonstrated remarkable adaptability and a proactive approach to diversification, which have played a pivotal role in its sustained growth amidst the ever-evolving food delivery industry. The company’s expansion into various sectors and global markets demonstrates its dedication to maintaining a leading position in the industry. In summary, Zomato’s versatile business model drives its expansion and empowers numerous restaurants and food businesses to flourish in the era of digitalisation. The adaptability, innovation, and robust business model of Zomato position the company to maintain its leading role in the food delivery industry for the foreseeable future.

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An Informed Guide to Zomato’s Business Model – How Does It Make Money

I love to travel whenever I get the chance. A good thing about travelling is that you experience new cultures, eat new types of food and see how people around your country (and the world) live and eat every day. For centuries, food was bartered, exchanged and even used as a currency in many countries worldwide. Mayans and the Aztecs used Cacao beans for trading. Cacao beans were an informal currency during the US Revolutionary War of the 18 th century.

Travelers often face problems with finding good places to eat in new cities (or countries). I encountered this problem while backpacking through Europe, where I relied on inputs from locals about good food joints in the vicinity. Although I was always fortunate enough to find nice places to eat, I occasionally ran into roadblocks. My only go-to-reference for places to eat was the “Rough Guide” and “Lonely Planet Guides” to various places I went to—other than that, my choices were limited.

With the advent of the internet, things changed dramatically. Websites, blogs and discussion forums such as Indiamike.com and others came up, which gave international travelers a place to discuss, talk and learn what to eat in new places. Smartphones and mobile apps brought this information to our mobile phones, which led entrepreneurs to create apps such as Grubhub, Zomato and many others.

What is Zomato?

Zomato is a global on-demand food delivery aggregator . This app helps travelers, foodies, and everybody else order food online, reserve a table at a restaurant, and read reviews about the restaurant you plan to visit. Zomato offers both restaurants and individuals a platform to connect and share a common love for food. With a presence in 24 countries across 10,000 cities, Zomato is a top-rated global food aggregator.

Is the food delivery aggregator industry growing?

Yes, it is! The global food delivery industry will breach the US$2 70,317m mark by 2021. Growing at an annual CAGR of 10.39%, this industry’s market volume will cross US$401,391m by 2025. The ARPU or average revenue per user in this segment is US$154.89, making it an extremely lucrative market for entrepreneurs.

How did Zomato get so popular?

Zomato initially launched as an online restaurant directory called Foodiebay. Zomato’s CEO thought that the name was too similar to eBay. So a few naming iterations later, they came up with Zomato. Zomato used innovative marketing techniques and deals with restaurant owners to offer restaurant-goers discounts and deals, making it rapidly gain popularity. 

Zomato initially focused on growth through word-of-mouth and added over 1400 restaurants around New Delhi to its list. Zomato had over 2M customers, 8000 restaurants and expanded its operations to 5 cities in less than two years. Backed by its investors, Zomato grew through expansions and acquisitions , making it one of the most valuable food delivery aggregators globally.

What benefits does Zomato offer to its users?

Zomato reaches out to restaurants to get them listed on its platform. This makes the restaurant “active” on Zomato. This benefits those who wish to eat out, order in or suggest options to others. Additionally, as users keep ordering from or visiting restaurants on Zomato, they rate and review the restaurant too, helping others on the platform make informed culinary decisions.

Zomato’s mobile app offers an intuitive interface that helps you find a restaurant by cuisine, dish, location or review/rating, making it easy for those browsing for restaurants in an area to choose.

What benefits does Zomato offer to its restaurant and delivery partners?

Restaurants benefit from Zomato’s massive 32 million-strong monthly active user base to gain traction, increase order value and footfall, and get their food delivered to their customers. This improves the restaurant’s visibility and reach, making them cater to customers that might have otherwise skipped ordering from them. Additionally, with sponsored listings and specials, restaurants can stay higher up in search results, boosting their revenue further.

Delivery partners take advantage of the gig-economy popularized by Uber, Zomato and the likes, making it possible to earn a side income and improve their financial condition.

Today, every new and existing restaurant that wishes to gain popularity lists itself on Zomato to take advantage of its massive 32.1 million-strong monthly active user base. Zomato offers everyone using its platform visibility, choice and a tasty meal!

Zomato’s statistics

Zomato boasts of a staggering 45% market share in the food serving and delivery business and gets over 19 million visits to their website every month. Although most of their users are in India, Zomato has a massive fan following around the globe. The top contributors to Zomato’s foodie kitty include:

• India (54%)
• Australia (8%)
• United Arab Emirates (7.5%)
• United States (6.1%)
• Turkey (3.4%)

Over 58% of Zomato’s traffic comes from searches, of which 94.45% are organic searches. With over 1.4 million restaurants, 12,000 restaurant partners and 162,000 delivery partners, making it one of the most popular food delivery and aggregation platforms globally.

How many funding rounds has Zomato gone through?

Zomato has raised over US$900 million to date from various investors. These include:

• Seed Funding: $1M, July 2010, Infoedge
• Series A: Sep2011, Sep 2012: $3M, Infoedge
• Series B: 2012, $2.3M, Infoedge
• Series C: Feb 2013, $10M, Infoedge
• Series D: Nov 2013, $37M, Sequoia
• Series E: Nov 2014, $60M, Vy Capital, Infoedge
• Series F: Apr 2015, Infoedge
• Series G: Sep 2015, $60M, Temasek Holdings
• Series H: Feb 2018, $200M, Ant Group
• Series I: Feb 2019, $39M, Glade Brook
• Corporate Round: Jan 2020, $150M, Ant Group
• Venture Round: Feb 2021, $250M, Kora

In July 2021, Zomato went for a wildly popular $1.2B IPO, shelving all speculations about the sustainability of the food delivery business.

How does Zomato work?

For users, Zomato brings food to their table. For restaurants, Zomato brings them orders and customers. For delivery partners, Zomato brings them avenues to earn more money. Zomato’s workflow is exceedingly simple, which is the main reason for its popularity. Here’s how Zomato works:

• Customers find what they want to order through Zomato’s app or website and place an order
• Restaurants receive the order and start preparing food
• Delivery partners reach the restaurant to pick up the meal for delivery
• The delivery partner delivers the order to the customer
• Customers can either pre-pay for their orders online or pay cash-on-delivery in some locations

What is Zomato’s business model?

Zomato is a food delivery aggregator. They help restaurants and individuals come together on their platform to order and deliver food. Here’s how Zomato earns money through various channels:

Advertisements

Zomato generates over 70% of its revenue through ads placed by restaurant partners. This boosts the restaurant’s visibility and gives customers a chance to try something new.

Subscriptions

Zomato Gold and Zomato Pro listings and subscriptions provide Zomato with a steady stream of income. These subscriptions help customers take advantage of free delivery, 1+1 offers and table bookings at partner gold restaurants.

Zomato charges a 25% commission per order. Note that this number may vary according to Zomato’s policies and local laws. Zomato earns a substantial share of its revenue through commissions and ensures that the aggregator functions without hiccups.

Delivery charges

Zomato’s delivery charges ensure that they can sustainably grow their delivery fleet, which is essential for their growth and to support their delivery partners.

Events such as Zomaland and Zomato’s New Year Eve and other events provide them with additional revenue. Customers purchase tickets to these events and get a chance to taste exclusive dishes that restaurants can showcase during the event.

Zomato Kitchens

Zomato launched Zomato Kitchens to allow kitchen partners to invest in space for cloud kitchens. Restaurant partners can lease or hire these restaurants to run the kitchen.

In addition to those listed above, Zomato offers many region-specific avenues to boost revenue.

How to create an app like Zomato?

I wish I could say that’s easy ! Although in some ways, it is. Here’s all you need to create an app like Zomato :

• Perform market research to understand the viability of the product in your area
• Interact with industry experts or those with experience in the industry to help you analyze your idea
• Explore the competition—including major players such as Swiggy and Zomato
• Know the underserved needs of your customers
• Find a world-class development partner such as Volumetree to get access to their tech experts
• Focus on building an immersive user experience
• Get feedback from actual users to improve your app’s flow
• Develop, test, and launch your app

That’s it. These seven simple steps can help you create an outstanding app like Zomato. However, there’s a catch. 

You must understand that users need a reason to switch to your app. Although most entrepreneurs switch to deep discounting to boost numbers, that is not a sustainable business model. Additionally, without innovation and exciting new features, users may simply start using an established provider such as Zomato, abandoning your app for good.

Want to build a food delivery app? Volumetree can help

We’re a great fit for funded startups and medium-large businesses, thanks to our experience in the food delivery industry, backed by a team of creative problem-solvers, designers, and tech experts.

We’re actively working with brands in Canada, Sweden, and the MENA region to test new ideas, and scale established products. 

Here’s how we work:

• Intro call to understand your project.
• Our teams help you figure out the viability of your idea and/or provide you with a completion time and budget.
• We brainstorm with you to create an effective strategy that backs the vision of your product.
• Our Project Management, UX, UI, and QA teams come together to create effective requirement documents and early product prototypes.
• We begin building your product and continue to improve it iteratively.
• Documentation and project hand-over

Do you have an innovative food delivery app idea in mind? Schedule a free 15-minute consultation with us to know how we can help you!

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• March 22, 2023

Decoding the Zomato Business Model. How does Zomato make money?

In this blog, we decode the zomato business model to help you understand how zomato makes money..

Zomato, a leading food delivery and restaurant discovery platform, has experienced tremendous growth since its inception in 2008. Its innovative business model has helped it transform the way people discover, order, and experience food. In this blog post, we’ll delve deep into the business model of Zomato using Alexander Osterwalder’s Business Model Canvas (BMC), a strategic management and lean startup template that enables businesses to describe, design, challenge, and pivot their business models effectively.

The Business Model Canvas comprises nine building blocks that cover the four main areas of a business: customers, offerings, infrastructure, and financial viability. These building blocks include:

• Customer Segments
• Value Propositions
• Customer Relationships
• Revenue Streams
• Key Resources
• Key Activities
• Key Partnerships
• Cost Structure

Let’s analyze each of these building blocks in the context of Zomato’s business model.

Zomato’s primary customer segments can be divided into three categories: end consumers, restaurants, and delivery partners. Each segment has unique needs and requirements that Zomato addresses through its platform.

A. End Consumers : This segment includes individuals who use the Zomato platform to search for restaurants, read reviews, and place food orders for delivery or pickup. They are looking for a convenient, reliable, and efficient way to order food and discover new dining options.

B. Restaurants : Restaurant owners and managers use Zomato to expand their customer base, increase their online visibility, and grow their sales. The platform allows them to showcase their menu, offer deals, and accept orders for delivery or pickup.

C. Delivery Partners : Zomato collaborates with delivery partners who fulfill food orders placed through the platform. These partners include freelance delivery personnel and third-party logistics companies. They benefit from Zomato’s extensive customer base and the opportunity to earn income through the platform.

Zomato offers distinct value propositions to each of its customer segments:

A. End Consumers : For end consumers, Zomato’s value propositions include:

i. Convenience : Zomato simplifies the food ordering process by enabling customers to search for restaurants, browse menus, read reviews, and place orders, all from the comfort of their smartphones.

ii. Variety : The platform offers a wide range of restaurant options, ensuring that users can always find something to suit their tastes and preferences.

iii. Personalization : Zomato’s algorithms and user-generated content help customers discover new restaurants and dishes tailored to their preferences.

iv. Loyalty Programs : The company offers the Zomato Gold membership program, which provides subscribers with exclusive deals and discounts at participating restaurants.

B. Restaurants : For restaurants, Zomato’s value propositions include:

i. Increased Sales : By partnering with Zomato, restaurants gain access to a larger customer base, resulting in higher sales and revenue.

ii. Online Presence : Zomato helps restaurants build their online presence by showcasing their menus, deals, and customer reviews.

iii. Marketing and Promotion : The platform offers restaurants promotional opportunities, such as sponsored listings and targeted advertising.

iv. Order Management : Zomato’s platform allows restaurants to streamline their order management process and improve overall operational efficiency.

C. Delivery Partners : For delivery partners, the value propositions include:

i. Flexible Earning Opportunities : Zomato offers delivery partners the flexibility to work on their own schedules and earn income based on the number of orders they complete.

ii. Access to a Large Customer Base : By partnering with Zomato, delivery partners can tap into the platform’s extensive user base, increasing their order volume and earning potential.

iii. Technology Support : Zomato provides delivery partners with the necessary technology tools, such as route optimization and real-time tracking, to improve their efficiency and delivery experience.

Zomato leverages multiple channels to reach its customer segments and deliver its value propositions:

A. Digital Channels : The primary channel for Zomato is its mobile app and website, which enable users to search for restaurants, read reviews, and place orders. These platforms also serve as the primary touchpoint for restaurants to manage their listings and accept orders.

B. Marketing and Advertising : Zomato uses various marketing and advertising channels, such as social media, search engine marketing, and content marketing, to increase brand awareness and attract new users to its platform.

C. Partnerships : The company forms strategic partnerships with restaurants, delivery partners, and other businesses to expand its reach and improve its service offerings.

Zomato maintains strong relationships with its customer segments through various initiatives and engagement strategies:

A. Personalization : Zomato uses data analytics and algorithms to tailor its platform to individual users’ preferences, ensuring a personalized experience for each customer.

B. Customer Support : The company offers prompt and responsive customer support through various channels, such as in-app chat, email, and social media, addressing user issues and concerns.

C. Feedback and Reviews : Zomato encourages users to provide feedback and reviews on restaurants and dishes, fostering a sense of community and trust within its platform.

D. Loyalty Programs : The Zomato Gold membership program rewards loyal customers with exclusive deals and discounts, fostering long-term relationships with users.

Zomato generates revenue from multiple sources:

A. Commission on Orders : The company charges restaurants a commission on each order placed through its platform.

B. Advertising and Sponsored Listings : Restaurants can pay for advertising and sponsored listings on Zomato’s platform to increase their visibility and attract more customers.

C. Subscription Fees : Zomato generates revenue from its Gold membership program, where users pay a subscription fee to access exclusive deals and discounts.

D. Delivery Fees : For some orders, Zomato charges customers a delivery fee, which contributes to its revenue.

Zomato’s key resources include:

A. Technology Infrastructure : The company’s mobile app, website, and backend systems form the foundation of its service offerings.

B. Data and Analytics : Zomato’s data on user preferences, restaurant performance, and delivery patterns enables it to improve its platform and offer personalized experiences to users.

C. Brand and Reputation : Zomato’s strong brand and reputation in the food delivery industry help attract new customers, restaurants, and delivery partners to its platform.

D. Human Resources : The company’s skilled workforce, including developers, designers, marketers, and customer support representatives, contribute to its ongoing success.

Zomato’s key activities include:

A. Platform Development and Maintenance : The company continuously develops and maintains its technology infrastructure to ensure a seamless user experience.

B. Marketing and Promotion : Zomato invests in marketing initiatives to increase brand awareness and attract new users, restaurants, and delivery partners.

C. Data Analysis and Personalization : The company analyzes user data to refine its algorithms and offer personalized experiences to its customers.

D. Partner Acquisition and Management : Zomato continuously acquires and manages relationships with restaurants and delivery partners to expand its offerings and improve its services.

Zomato’s key partnerships include:

A. Restaurants : The company partners with a vast network of restaurants to offer a wide variety of dining options to its users.

B. Delivery Partners : Zomato collaborates with freelance delivery personnel and third-party logistics companies to fulfill orders placed through its platform.

C. Payment Providers : The company partners with various payment providers to facilitate seamless and secure transactions for users and restaurants.

D. Technology Partners : Zomato works with technology partners to enhance its platform capabilities and offer innovative features to its users.

E. Strategic Alliances : The company forms strategic alliances with other businesses, such as hotel chains and event organizers, to expand its reach and enhance its service offerings.

Zomato’s cost structure includes the following key components:

A. Technology Development and Maintenance : The company incurs costs related to the development, maintenance, and improvement of its technology infrastructure.

B. Marketing and Advertising : Zomato invests in various marketing and advertising channels to increase brand awareness and attract new users, restaurants, and delivery partners.

C. Operations : The company incurs operational costs, such as personnel salaries, office rent, and utilities, to manage its day-to-day activities.

D. Customer Support : Zomato’s customer support expenses include the cost of maintaining a dedicated team to address user issues and concerns.

E. Payment Processing : The company bears payment processing fees associated with facilitating transactions between users and restaurants.

Zomato’s innovative business model, built on the foundations of Alexander Osterwalder’s Business Model Canvas, has been instrumental in its success and growth within the food delivery industry. By understanding and addressing the unique needs of its customer segments, creating compelling value propositions, leveraging effective channels, nurturing strong customer relationships, and optimizing its resources, activities, partnerships, and costs, Zomato has managed to transform the way people discover, order, and experience food.

Through this in-depth analysis, businesses across industries can glean valuable insights from Zomato’s successful approach and apply these learnings to their own business models. In an increasingly competitive and rapidly evolving market landscape, adopting a robust and agile business model like Zomato’s can help companies thrive and stay ahead of the curve.

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Zomato Business Model: Everything you need to know

In July’21,  Zomato’s IPO raised Rs 9,375 crore . It was one of the most talked-about events as it became the first Indian startup to go public, that too after COVID when many things became uncertain. This means that Zomato was doing something right, and I decided to read more about its business model, which eventually made me write this article.

View this post on Instagram A post shared by Zomato (@zomato)

Earlier I used to think that Zomato was just about food delivery and restaurant listing. But, I forgot it’s a “FoodTech,” which means it has access to a large amount of data that it has been using in exciting ways and will continue to do so.

In this article, I will try to give a bird’ eye view of Zomato and cover a bit of everything about its business model to its future business plans, how does Zomato make money, and its mind-blowing marketing strategies.

The Growth Story of Zomato

As of 31st March 2021, Zomato is present in 24 countries outside of India. According  to their RHP , the company has decided to focus only on the Indian market going forward, considering the market potential.

Zomato has over 1.4 million listed restaurants and 12,000 restaurant partners. Moreover, it has over 6500 restaurant partners for Zomato Gold. In December 2020, it had around 162,000 active delivery drivers and 3,50,000 active restaurant listings on its platform in India

To fuel its rapid expansion, Zomato acquired several startups around the world. In 2014 itself, it  acquired four startups overseas . It was part of its strategy to enter markets with low competition in this space of restaurant discovery, make money here, and then tap the markets having competition.

What Strategies made people “Swiggy Karo, Fir Jo Chahe Karo”

One of its  most significant acquisitions has been Uber Eats India business , which helped the company get a competitive advantage from its rival Swiggy and one rival less for the company to deal with. Its latest acquisition has been  Fitso, a full-stack sports facilities provider  and discovery startup, which hints at its foray into the nutrition segment.

Business Model Canvas of Zomato

Customer segments: .

Broadly, we can say that there are three customer segments in Zomato’s business model:  

• Local restaurants : Zomato helps restaurants enhance visibility to their target audience, provides opportunities for targeted advertisements, customer service & engagement, as well as track their performance using its analytical tools. 
• Users : Can be divided into two categories for Zomato – one who want food delivered to their homes quickly and others who want to go out (they can look for places according to the distance, budget, cuisines and even reserve a table).
• Reviewers : Also known as content contributors of Zomato, these are the people who help others make their choice by providing ratings and reviewing restaurants basis various parameters.

Key Partners: 

Restaurants, delivery personnel, and food bloggers (by actively providing reviews on Zomato) are the critical partners in Zomato’s business model. It has tied up with various other companies as well that help in various aspects. A few of the notable partners are: 

• London & Partners (helped Zomato in finding the location for office setup, market research, advise on legal matters, assistance in staff and management recruitment, etc.), 
• Uber Taxi (this partnership increases convenience for customers who are eating out by enabling them to book an Uber ride to the restaurant they want to dine at from their app itself) 
• Electronic payment companies like Visa,  PayPal , etc.

In August 2021, a year after the launch of Swiggy Money (a digital wallet that Swiggy made in association with ICICI Bank), Zomato incorporated –  Zomato Payments Private Limited (ZPPL), its wholly-owned subsidiary , to provide payment aggregator services and payment gateway services for its users following the RBI guidelines.

Value Proposition

Zomato follows the QAAA model, which consists of: 

• Improving  the quality  of food:  Through Hyperpure (talked about in detail later) and Food Hygiene rating, it helps its partner restaurants maintain high-quality standards. 
• Boosting  accessibility  for customers:  Starting with metro cities, Zomato has expanded to tier 2 and 3 cities and continues to increase its reach.  
• Focusing on  affordability :  Zomato aims to make food affordable for its consumers without compromising on profits for partner restaurants.
• Driving the force of  assortment :  Zomato wants to help customers make an informed choice by providing a wide array of information in a structured manner.

Revenue Model: How does Zomato make money?

1. delivery charges:  .

Based on the number of orders, Zomato charges the partner restaurants a commission, which is divided between the company and the delivery partners.

In FY 2019, the company made four times more on delivery than it did the previous year. These charges formed around 75% of the total revenue for the company in that year, which makes delivery charges the largest source of income for the company.

According to the company, in India, the number of customers ordering food every month on their platform in FY 2021 touched 6.8 million customers with three times the average frequency. 

Contribution per order rose from -47 Rs/order in Q1 FY20 to +27 Rs/order in Q1FY21 (as shown in the below diagram)

2. Zomato Pro:  

Earlier known by the name Zomato Gold, it was based on a freemium model where customers who paid a certain fee enjoyed premium services while dining at partner restaurants like offers on food and beverages.

We have 1.8mn Zomato Pro members as of today. And one of the most requested features from our customers has been “Unlimited Free Deliveries” (something like Amazon Prime). So… in a few hours, we are launching our Limited Edition *Pro Plus* membership for select customers… pic.twitter.com/RtL4ftDBpt — Deepinder Goyal (@deepigoyal) August 2, 2021

Zomato introduced a new membership service in August, an ‘invite-only upgrade of Zomato Pro’s named Zomato Pro Plus.  CEO Deepinder Goyal assured that Zomato would bear the entire cost  of this service, and delivery partners won’t lose income on the same.

3. Event Organization: 

Zomaland event of Zomato became quite popular before COVID hit, and it’s an excellent opportunity for partner restaurants to get visibility. Here Zomato earns from both customers (entry fee) and restaurants. 

4. Restaurant Advertising: 

With  90 billion monthly visits  and 1.4 million restaurant listings, Zomato sure is the go-to place for people who want to find where to eat/order from next.

So, to stand out on the platform, the restaurants have to pay a certain sum of money so that their restaurant gets noticed by people visiting the platform. Zomato charges a certain amount of money from restaurants for advertising. 

By charging a monthly subscription fee, it even provides restaurants with analytical tools like Zomato order (with the help of which restaurants can manage their offerings to consumers and give discounts accordingly) and Zomato book (managing table reservations more efficiently). 

5. Zomato Kitchens: 

Here, Zomato will connect  kitchen partners   (a partner who will construct the kitchen according to the design and specifications and in turn Zomato will pay money to operate this place)  with restaurant partners  (partners who will operate their restaurants in the space which Zomato had asked kitchen partners to construct).  

The role of Zomato is to act as an aggregator bringing together both kitchen and restaurant partners. Since it has access to a large amount of data, it knows which location would be optimum for the construction of  cloud kitchens .

It might start its cloud kitchens in the future and develop an in-house brand that competes with other restaurants on the platform. This could be a game-changer for Zomato and could turn out to be very profitable for them. 

For more clarity on what is a cloud kitchen and its types (can use any)

6. Hyperpure by Zomato: 

Launched in 2018 to provide good quality ingredients to partner restaurants, under this program, Zomato collaborates directly with farmers, producers, mills, and processors to monitor the source of each of the ingredients being sold to ensure freshness and quality of the produce. According to its RHP, in March 2021, it supplied ingredients to 9,225 restaurant partners across 6 Indian cities.

Zomato aims to bring more efficiency in the supply chain by using a technology-driven end-to-end platform so that fewer people are involved; high-quality ingredients are supplied and reducing food wastage. 

During the first pandemic wave, many restaurants signed up on this platform, but these numbers didn’t grow as such during the second wave. Despite the challenges, investors are optimistic that the platform will increase by ten times in the next 2-3 years. 

Cost structure: 

Expenses incurred by the company can be broadly categorized into: platform development cost, branding and advertisement cost, credit card processing fees, legal and accounting fees, office maintenance cost, and employee salaries. 

Fixing its Unit Economics

Unit economics is the profit made by the company per food order delivered, and positive unit economics is one of the biggest obstacles for any food delivery company in the world. According to its RHP, Zomato has been able to achieve positive unit economics.

This was possible by charging higher delivery charges from customers, decreasing discounts offered on the platform (offering high discounts initially was one of the ways it acquired customers on their platform and made them habituated to use it), decreasing the advertising expenses, and increased commission from restaurants, utilizing its logistics fleet more efficiently and adding new sources of revenue using subscriptions like Zomato Pro.  

Content is the king for Zomato: 

Zomato’s focus on content (content related to restaurants on its application and website) helps them to attract a large number of customers to their platform organically, and even numbers support this: in FY2021, 68% of new customers were acquired organically without any paid advertisements (source: Zomato RHP).

Customers coming to the platform further enhance the richness of this content by adding their ratings, reviews, and photographs of the restaurants and food served there. This creates a virtuous cycle that further feeds into the transaction funnel and creates a strong flywheel effect. 

Marketing Strategy of Zomato

When it comes to its social media presence, Zomato has been very clear about its motive to make such content for its customers, which educates them about the brand and is also very refreshing and fun to watch. This is even evident from the bio company has written for itself on its social media handles, and the company does stand up to its promise of delivering entertainment. It focuses on the emotional benefit part rather than the functional benefits.

Zomato’s social media handles (YouTube, Instagram, Twitter, LinkedIn) are full of exciting campaigns that would be challenging to cover all (honestly, one can even write one complete article on that and we will be writing very soon). Here are some of the campaigns/posts/tweet threads that I enjoyed from Zomato in recent times:

Turning crisis into opportunity:  #zomatoloot  campaign 

Almost a year back, when users criticized Zomato’s butter chicken ad on YouTube, the brand’s marketing team announced the #zomatoloot campaign where users were given a chance to create ads for the brand, and the winner got a sum of 25 lacs. This gave the brand a lot of free publicity and, of course, ads that it could use for the coming weeks.  4113 entries  were received as a part of this contest, and the winning ad was:

Winning consumer’s trust during COVID times: 

Last year, when the COVID wave hit and people were skeptical about ordering from outside, Zomato ensured that the safety of consumers is their priority, and they are taking steps for the same.

‘On-Time or Free’ (OTOF) campaign: 

Taking inspiration from Dominoes, Zomato launched this campaign in December 2019 to guarantee on-time delivery to its  customers on its entire menu and not just one food item  (as used to happen traditionally). 

Never late to the party: 

Zomato seldomly misses an opportunity whenever a significant event occurs, be it related to sports, politics, or business. 

iPhone 12 vs iPhone 13 pic.twitter.com/V3hzWb0eSQ — zomato (@zomato) September 14, 2021

Platform-specific content: 

Zomato adapts its content according to the platform. For example, one can find memes related to office and colleagues on LinkedIn, reels made on ongoing trends on Instagram, replying to other brands on a constant thread in their context on Twitter, Food challenges, and Celebrity Brunches on YouTube, etc.

Zomato’s Twitter account regularly engages with the audience and keeps posting excellent content, which made  Twitter award Zomato for the Best brand voice in 2020 . Deepinder Goyal, its founder, makes sure that he makes important announcements related to its activities on Twitter.

Over the last few days, one of the most requested features on @zomato has been – a selection of home style food for people battling poor health. We just launched home style mini-menus along with thousands of restaurants across the country. #RestaurantsAgainstCOVID (1/3) pic.twitter.com/2JDqqtic5Y — Deepinder Goyal (@deepigoyal) April 27, 2021

OOH campaigns: 

Before social media became so popular,   brands used to spend heavily on billboard advertisements, and so did Zomato. Minimalistic, mostly text, but always grabs attention and brings a smile to your face.

Hey guys, we at @Zomato (me mostly, I'm a great team player) have been working on some outdoor ads. If you spot one in your city, please share a picture with us (me). Thanks! 😇 ☺️ pic.twitter.com/sxl5qYpAuk — Akshar (@AksharPathak) November 29, 2017

Zomato also uses push notifications in mobile apps, email marketing, SEO, and paid advertisements to gain top-of-the-mind recall for consumers.

Future of Zomato: 

In India, with the coming of COVID,  the food delivery market saw a growth  in the number of orders as people who used to go out to eat preferred to eat at their homes safely. This trend will most probably continue in the future as well.

One of the biggest challenges for any food delivery company is making unit economics per order favorable, which Zomato has achieved recently. Increased demand for food delivery and positive unit economics per order means that Zomato’s profitability is likely to grow.

Apart from food delivery, Hyperpure has been one of the focus areas for the company. Whether Zomato will be able to scale this up and reap profits out of it, is something to watch out for. Recently,  cloud kitchens have been gaining traction .

How Rebel Foods business model is taking Kitchen to the clouds

After  REBEL foods recently became a unicorn , it will be interesting to see how Zomato scales up its cloud kitchen venture: Zomato kitchens, in its multidimensional business model. Given the enormous access to data that Zomato has, it should try to compete in this segment.

-AMAZONPOLLY-ONLYWORDS-START-

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Curiosity and eagerness to learn about new things have made me learn more about the start-up ecosystem, public policy, and brand management. An alumnus of IIM Kozhikode, I’m starting my corporate career again as a Management Trainee. I like reading non-fiction books, listening to podcasts, playing board and card games, sketch and paint.

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Zomato business model

Zomato was launched in 2010, from the rebranding of Foodiebay, a food directory website. Like any other startup in india, food tech unicorn Zomato too had its ups and downs. In 2015 , during the massive layoffs and losses, there were big question marks on the company’s survival in the market. But, Zomato defied the odds and came out even stronger to dominate the food delivery industry in India. 

Pankaj Chaddah and Deepinder Goyal , are the brains behind Zomato . They were alumni of IIT Delhi and co-workers at Bains & Co in New Delhi. In their office, they recognized how people had to wait for a long time to have a glimpse of the menu card. And, this led to the birth of Foodiebay. 

In Foodiebay, the menu soft copies were uploaded so that people can check out the menu on their smartphone and order quickly with no wait. The concept became an instant hit, their website traffic numbers increased significantly so they decided to expand their services to Kolkata and Mumbai. The number of people using the Foodiebay soared with each passing fiscal year. Later, the founders of Foodiebay wanted to make the venture even bigger, thus leading to Zomato, a simpler name to remember. They didn’t want people to confuse Foodiebay and eBay. In 2010, Zmato was officially unveiled. 

As the users of the Zomato website grew, Founders with the aim to enhance ease-of-use decided to launch a dedicated Zomato food ordering App.

However, this innovation needed a lot of funding to kick start. So they started doing series of funding :-

• In 2010, Info edge invested US$ 1 million into the Zomato
• Then the next year, they gave whopping funds of US$3.5 million and US $10 million the following year
• In 2014, Sequoia Capital joined in and poured 50 million+ for the next three years
• Later investment firms like Temasek Holdings, Vy Capital, Baillie Gifford, and multiple other firms joined in.

So far in the last three funding rounds Zomato has been able to raise 100 million + funding each time and was valued at $5.4 billion .

The formula of success of Zomato according to their founders is hiring the right people with passion and dedication to take the company forward. In fact, they believe this is the biggest hurdle, and now they are proud of their team. 

During the earlier days of Zomato, the founders did not focus much on earning revenue, and only when the website gained huge popularity, they recognized the prospects of earning. When they had 62.5 million sign-ups, restaurants started contacting them to place their advertisement through which Zomato made a good revenue. Restaurants were eager to integrate Zomato’s online food ordering sytem into their ecosystem and multiply their sales. Later, Zomato enhanced the customer experience via cashless transactions. 

Today, Zomato is operational in 24 countries, across 10,000 cities. The revenue of the company is ₹2,486 crore as of 2020. 

Zomato’s IPO success is promising for other startups in India. The company’s stock market debit day ended at 66% at a value of $13.3B. The concept of Zomato is similar to US-based DASH that lets companies book restaurant tables and order food from restaurants. 

“The response from institutional investors has been strong. This suggests that the overall float available for trading might be limited leading to a higher GMP. We had to issue a *Subscribe with Caution* rating for it’s IPO, keeping in mind the long investment horizon required for high-growth companies that are currently loss-making,” said Rajnath Yadav, Research Analyst at Choice Broking.

What Does Zomato Bring to the Table?

Since the launch of Zomato, it has created a buzz in tier-1, tier-2, and tier-3 cities throughout India. Zomato operates on the QAAA model, which stands for Quality, Accessibility, Affordability, and Assortment to both their partners and customers. Let’s understand what makes Zomato so distinctive from its market rivals.

Improving Food Quality: Yes, Zomato has invested big time in improving the food quality by funding restaurants through their Hyper Pure campaign. This funding helps restaurants to maintain the highest standards with the use of high-grade ingredients, fresh veggies, and a hygienic kitchen.  Zomato gives food hygiene ratings to each restaurant thus allowing customers to order accordingly.

Increased Accessibility for Customers: With each quarter, Zomato is expanding to new cities across India, covering the suburbs along with the metro cities. Nowadays, they offer additional features such as corporate catering and table reservations. And, their feeding India initiative is a campaign that works towards creating a better India when no one sleeps on an empty stomach. 

Maintaining Affordability: Affordability has been the major aspect that Zomato has never overlooked. They offer amazing deals and discounts on food ordering. Their gold package subscription was an instant hit, allowing customers to save a considerable amount on regular food orders. They have always strived in the direction of ensuring affordability without compromising much on their profits.

Aid in the Assortment: Zomato presents its customers with the opportunity to taste dishes of diverse cuisines with no geographical borders. They provide the most detailed information on their App so that their customers can make well-informed decisions. 

How Zomato Earns Money?

Ever since Zomato’s inception it has been churning out good revenues but was never able to make hefty profit. Hence the reason why people think Zomato doesn’t earn much and they expect it to be the same in the future.

But only few are able to realize what Zomato brings to the table and apart from it’s cheap food delivery services , it has diversified it’s revenue into multiple streams and today we’re gonna talk about that:-

Restaurant Advertising

Restaurants are the backbone of Zomato. As of now, there are about 131,233 active restaurants added each month on Zomato and every restaurant on Zomato prefers to be on the top of searches whenever a customer searches for a relevenat dish in their locations. So, the food delivery App Zomato offers restaurant advertisements.

It typically charges 40 to 50 Rs per click on their platform. Also there is a zero restaurant listing fee on Zomato. Hence for F&B business owners all they can do is sign for free and to boost their order numbers, they pay upfront for the advertisments.

Food Delivery

Approx 75% of Zomato’s revenue in the fiscal year 2019 was through food delivery commissions. Zomato has currently developed it’s own ecosystem for online food ordering where restaurants have to use Zomato’s own associate riders to delivery their orders and there is no way around. In the end, restaurants are charged for delivery commissions, which you can completely avoid if you use NinjaOS as your online ordering system.

Anyways, Zomato’s revenue was $155M in 2020 which was approx four times what they made last time. 

Subscription Programmes

The Gold subscription that aims at providing premium services to their customers is amongst the biggest revenue streams of Zomato. If a customer has a gold subscription, they get complimentary beverages and food. 

In the year 2020, the revenue from the gold subscription model was about $49 million, and $30 million. The unlimited pack gold subscription charge in India is Rs 1800 for 365 days.  

Live Events

Another way Zomato makes good earnings is by hosting live events with the objective to promote their partner restaurant. These restaurants get great exposure & visibility via Zomato events, and they have to pay a hefty price for it. 

The Zoomland event of Zomato is quite popular, it charges its users a nominal fee to enjoy food and live musical performances. 

Zomato’s White Label Access

Recently, Zomato has an unrivalled Whitelabel Platform that is a suite of technologies that allow restaurants to operate their business over the Internet. The key feature of this platform is allowing restaurants to have their custom-branded native Apps to better engage with their customers. 

The Whitelabel platform works on the subscription model of $200 per month. 

Zomato Kitchens

Zomato also belives in cloud kitchen’s concept where they provide infrastructural services to certain restaurant partners. They fund food entrepreneurs to set up a restaurant in the right location with an investment of Rs 35 Lakhs. 

It offers a return of 2 to 4 lakhs to the inventors. Presently, Zomato is having 180 affiliate kitchens. Zomato is always in search of passionate entrepreneurs for setting up Zomato kitchens. 

Zomato Hyper pure

Zomato under the Hyper pure program collaborates directly with the farmers to enhance the quality of raw ingredients supplied to the restaurants at the most competitive rates. The hyperpure venture was launched in August 2018, and within a few months, the concept rapidly grew in numbers. 

By November, Zomato was supplying raw ingredients to 350 restaurants across Bangalore, and approx 1,000 restaurants as of now. The significant increase in demand led to encouraging Zmato to considerably invest in large scale operations to meet the growing raw material requirements. 

Recently, Zomato bought a warehouse of 6,000 sq. ft in Bangalore, having a capacity of 4,000 metric tons. They are in the process of setting up an even bigger warehouse in Delhi, and then expanding to nine other cities by the end of the year, and eventually exploring the international markets. 

Multiple Business Partnerships

Zomato has a key partnership with Uber Taxi. The App has a feature that allows its users to book a ride to the Zomato restaurant they want to dine at. 

Zomato is in collaboration with London & Partners to boost their online presence in the European regions. Their other big business partnerships include PayPal and Visa. 

What is Zomato’s Future?

In the  Zomato business model case study, let’s talk about Zomato’s future. Zomato’s IPO is re-imagining the future of food in India. 

Their IPO was the biggest hit in India in 2021. They raised approx  Rs 8,250 crore via an initial share sale. 

When the COVID-19 pandemic and swerve restrictions have hard-hit most of the Indian sectors, Zomato stayed strong during these challenging times. 

They brought in more funds to grow their business. Their delivery boys worked tirelessly to deliver orders to even the containment zones throughout the country. This allowed for foodies to enjoy their favourite food from the comfort of their homes even when there is lockdown everywhere. 

“ We need to continue to invest in three core areas for the growth of our business which includes a) customer and user acquisition, b) delivery infrastructure, and c) technology infrastructure. We have made these investments in the past, and we expect these to continue to be critical for the gro wth of our business in the future,” Zomato said. 

The next couple of years looks good for Zomato, with coronavirus is here to stay, even when the global vaccination drive is happening at a rapid pace.  

The future plans of Zomato include setting up hyperpure in some of the major cities throughout the country . They will be expanding their food delivery services to about 500 cities across India. 

They also have big plans of expanding in foreign countries. Drone delivery is the new buzz in the food App delivery, especially internationally, and in coming years, it is expected that it will come to India. Zomato will also be adding new cities to their Zomato gold subscription. The Zomato infinity dining expansion is the next big thing to happen. 

In the end, we hoped that you learned the right lesson for this Zomato’s business model assement and case study, that if you have an idea, determination and success will come hunting you. 

Do you have anything to add to this, why Zomato has been so successful in India, even when people here are used to ordering delivery from restaurants near them? Share it with us in the comment section below, our readers would love to hear your thoughts.

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How Zomato plans to achieve a balance in profitability and growth?

Zomato’s focus on growth may lead to delays in its short-run profitability targets but strategic initiatives hold the possibility of building a more sustainable business model with high-quality growth.

Representational image (Pic - Getty Images)

Zomato, the food delivery platform that got bids of over Rs 2 lakh crore for its Rs 9,375 crore initial public offering, has since lost about 54 percent of its market capitalisation. Its shares have tanked over 61 percent from its 52-week high of Rs 148.85 on December 9, 2021.

Investors have been shunning lossmaking new-age tech stocks across the globe, a trend that is now driving companies towards the need to improve profitability while hitting the pause button on growth.

Zomato ’s latest quarterly results showed its consolidated net loss narrowed to Rs 250.8 crore in the three months ended September 2022 from Rs 434.9 crore in the September 2021 quarter. Adjusted revenue grew 48 percent on a YoY basis to Rs 2,107 crore. The company said it crossed the billion-dollar annualised revenue mark for the first time in the quarter.

Does this mean the worst is behind Zomato? Before we answer that question, here is how Zomato makes money.

Revenue streams

Related stories

Zomato’s platform currently has three major offerings – food delivery, Hyperpure, and quick commerce. Food delivery generates revenue through commissions charged to restaurant partners for using the platform. It also earns from restaurants advertising on the platform.

Its second-biggest business segment, Hyperpure, supplies fruits, vegetables, poultry and dairy sourced from farmers, mills, producers and processors to restaurants.

Through its recent acquisition of Blinkit, Zomato entered the quick commerce space, which operates on a commission revenue model, earning from local shop owners and merchants that it has tied up with. Additionally, a delivery fee is charged if the order amount is below a minimum purchase criteria.

There is also a minor dining-out segment across India and the UAE, which is monetised through advertisements that restaurant partners pay for to enhance their visibility on the platform.

However, not all metrics improved. Zomato’s gross order value (GOV) growth decelerated as a result of focusing on improving unit economics.

“We have strategically chosen to trade low-quality growth for better unit economics,” Zomato founder Deepinder Goyal said in a letter to shareholders on November 10. “That’s part of our long-term strategy to build a high quality, high growth business. At the same time, we are not shying away from investing behind high quality compounding growth.”

Analysts’ reactions to Zomato’s strategy were mixed. Valuations are split, ranging from a downside of 14 percent to an upside of as much as 116 percent. However, on average, analysts pegged an upside of 50-70 percent in the stock price from current levels.

Nomura suggested uncertainty in achieving an ambitious double-digit contribution margin (CM) as well as concerns over the Blinkit acquisition affecting the bottom line due to intense competition and poor unit economics. It sees CM peak at 7.5 percent by FY31, food-delivery revenue to moderate by FY27F, with gross order value CAGR at 22 percent between FY22 and FY27 and plummeting to 12 percent between FY27 and FY32. It said adjusted EBITDA for Blinkit will not turn positive till FY31.

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Bullish on delivery

JM Financial, on the other hand, remains bullish on the company’s long-term growth prospects in the hyperlocal delivery space and said it is well-positioned to benefit from tailwinds such as improving tech penetration and rising income share of digitally native millennials/Gen Z. It expects food delivery GOV to grow at a CAGR of 26 percent between FY22 and FY27 before reducing to 23 percent between FY27 and FY31 and said Blinkit will achieve EBITDA breakeven by FY26.

The company said overall adjusted EBITDA loss (ex-quick commerce) will decline further with breakeven expected in the next two to four quarters.

“Over the medium term, our ambition lies in getting food delivery adjusted EBITDA to ~4-5 percent of our GOV. Based on our current growth projections, that could happen with a contribution margin as a percentage of GOV of ~8 percent,” Akshant Goyal, chief financial officer of Zomato, said in the letter to shareholders.

Experts said a number of catalysts might play out in Zomato’s favour.

In terms of growth, Zomato still has a long way to go, with the Indian food delivery segment expected to reach $25 billion by 2033E, expanding at a CAGR of 12 percent from FY22-33, according to Macquarie. Market expansion and scaling up will be paramount. The food tech industry is still highly underpenetrated, reaching only about 60 million individuals as compared to the expected 150 million individuals by 2025, as per JM Financial.

Also read:  Credit Suisse lines up its top picks as India's growth trend looks 'resilient'

Zomato’s performance proves the point that while the potential for growth exists, bringing in profitable growth continues to be a challenge. From the perspective of public markets and stock performance, it will have to demonstrate growth and profitability.

What works for Zomato is that it has gained market share steadily. Swiggy and Zomato registered food delivery/quick commerce GOVs of $1.3 billion/$257 million and $1.6 billion/$2 billion, respectively in the first half of calendar 2022.

But can Zomato deliver growth accompanied by improving consumer stickiness and better unit economics? So far, Zomato’s investments towards expansion in tier II, III and IV cities have led to a lower contribution of 1.7 percent in FY22 compared with 5.2 percent reported for FY21.

However, Zomato now reaches 1,000+ towns and cities in India where the contribution margin has improved even beyond the top eight cities. In the second quarter of FY23, there were 248 cities that were contribution-positive (+15 percent QoQ), contributing 91 percent to GOV.

Smaller cities

Jefferies said while smaller cities have lower average order values (AOV), the cost base is also lower and 248 of the cities that were contribution-positive in the second quarter were not the largest 248 cities, with the smaller cities performing on profitability.

It also estimates a 32 percent CAGR in delivery revenue over FY22-26E and said that unit economics will steadily improve with scale as Zomato unlocks cost efficiencies and as customer willingness to pay for convenience increases.

Another reason for analysts’ optimism is that Zomato has strategically undertaken initiatives over the years to keep an eye out for long-term growth opportunities and has consistently built capabilities, including acquisition of Carthero Technologies in FY18 to add hyperlocal delivery capabilities, and the launch of Hyperpure in FY19 to enter the B2B supplies vertical.

With its acquisition of Blinkit, Zomato is expected to create synergies via cross-leveraging the user base and the delivery fleet. Addition of a value-added service like grocery delivery to the portfolio also presents potential cross-sell and up-sell opportunities, analysts said.

Blinkit performance improved with respect to its contribution margin (-7.3 percent in Q2 of FY23 vs -17.3 percent in Q1 of FY23) and GOV that increased by 26.5 percent on a quarterly basis, backed by focus on stabilising operations, smooth app integration, increased throughput per store and the take rate, which is the commission fees levied by Zomato on restaurant partners as a percentage of the order value.

Besides, Zomato has undertaken two initiatives to support expansion in the food delivery business, namely Intercity Legends, which is the intercity food delivery service, and Zomato Instant, which is food delivery in 10-15 minutes launched in some locations in Gurgaon and Bengaluru. Analysts said these low-capital initiatives are showing good traction and some of them could generate incremental growth over the medium to long term.

However, from the poor level of profitability, it may still be a tall order for the company to maintain growth while improving profitability.

Zomato’s food delivery GOV CAGR is expected to be 25-30 percent for FY22E-25E to reach abut Rs 44,000 crore, while overall revenue CAGR estimates are in the 40 percent range for the next three years with the expectation of touching Rs 14,000 crore by 2025E. EBITDA is also expected to largely turn positive in the same period. Net profit estimates vary, with many brokers assuming it to also turn positive by 2025E. Deutsche Bank said it will reach Rs 1,000 crore by 2025E while on the other extreme, Dolat Capital expects it to still remain negative at about Rs 2.39 billion, while also remaining conservative on EBITDA estimates, and expects it to reduce losses to Rs 600 crore by 2025E.

Analysts have valued the company through a discounted cash flow (DCF) model with a discount rate and terminal growth rate in the range of 11-14 percent and 2-6 percent, respectively. “We do believe the company can compound its revenues by 10x over FY22-FY30E but with modest profitability and cash generation and thus believe DCF valuation as an ideal tool to value real long term potential,” Dolat Capital said in its report.

According to Jefferies, Zomato trades at 5.0x CY23E EV/revenue, which is a premium to the median of global food platforms at ~2.3x, and believe it to be warranted by Zomato's stronger growth.

Although the long-term growth outlook and valuation largely looks positive, the management’s uncompromising growth ambitions might delay their profitability goals such as achieving food delivery adjusted EBITDA as a percentage of GOV of 4-5% over the medium term.

“We believe the company has multiple levers to achieve this target, such as 1) further increase in restaurant take-rates, 2) further rationalisation of customer subsidies (delivery charges and discounts), and 3) operating leverage,” JM Financial said. “However, given the near-term growth concerns, margin improvement can be slower than earlier anticipated.”

It said the near-term growth blip could be an interesting entry point for investors to accumulate positions and partake in the long-term value-creation opportunity.

Disclaimer:  The views and investment tips shared by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Business Model of Zomato – How does Zomato make money?

June 9, 2023 | By Hitesh Bhasin | Filed Under: Business

The business model of Zomato revolves around providing food delivery services, information, user reviews and menus of partner restaurants.

Zomato’s business model has revolutionized the food business industries by incorporating various restaurants and making it convenient for people to find restaurants, provide feedback, check listings, and availability according to their choice of cuisine.

This food-platform is available across 24 countries in the world, providing insightful analytics to various restaurants. These analytics helps the restaurants to improvise and enhance their business.

In this post, we will be unraveling the key idiosyncrasies of the Zomato business model and understand how it manages all its operations and generates revenues. So, let us get started right away –

Table of Contents

Introduction to the Business Model of Zomato

Zomato is an Indian food-based application that provides various services like restaurant search & discovery, online delivery, and a plethora of different cuisines to choose from depending on your price ranges.

The popularity and applications of Zomato have increased manifold in the last few years, which makes people wonder about the actual Business model of Zomato.

In the next few sections, we will be going through the various verticals of the Business model of Zomato, but first, let us have a look upon its creation and some other associated historical aspects-

Creation and Essential history of Zomato

Before analyzing the Business model of Zomato, it is better to know a little about the background of Zomato. Zomato was created by two Indian IIT graduates Deepinder Goyal and Pankaj Chadda in 2008.

Initially known as FoodieBay, the idea of Zomato popped up when Deepinder found his roommates searching for leaflets of menus to order food. By incorporating the menus of various restaurants in one single application, the task of choosing a restaurant and ordering food can be tremendously eased.

This led to the creation of Zomato.

Zomato has tremendously developed from a simple home project to one of the most used online food-based platforms in the world. It accommodates a list of restaurants and cafés belonging to various price ranges and cuisines.

But the real factor that makes Zomato so successful lies in the robust and robust business model which is initially presented. Different services that are offered by Zomato business model are-

• Restaurant Search & Discovery
• Online Ordering
• Table Reservations & Management
• POS Systems
• Subscription Services

Different Segments of the business model of Zomato 

The Business model of Zomato is hugely different from its contemporaries Swiggy and Foodpanda . This application was the pioneer of online food-based applications, and hence, it was a more significant challenge for Zomato to make the market accept the concept of “online restaurant-searching.”

The Business model of Zomato is a well-orchestrated plan which consists of various aspects for the smooth functioning of the application. Following are some of the critical elements of Zomato-

1) Customer Segments

Zomato consists of three primary segments i.e., Users, local businesses, and reviewers.

• Users- Zomato provides a platform for people to search and locate restaurants according to their budget, location, and preferred cuisine. It also provides an online-based efficient food delivery service.
• Local businesses – Zomato also provides a platform for restaurants and local cafes to promote their business and to reach a target audience, thereby generating revenue for various outlets.
• Reviewers- Reviewers or content contributors are the people who provide positive ratings and comments. These comments are mostly synonymous with the quality of food and services provided by the restaurants.

2) Zomato Provisions

Zomato provides information on the restaurants and cafes to the customers based on their location, their choice of cuisine as well as the specified budget.

It also builds a bridge and facilitates communication between the partnered restaurants and the customers.

Zomato also has an organized and well-orchestrated pricing model for the online delivery services that they provide.

Their quality of services has also been enhanced due to the inclusion of Zomato Gold and Piggy Bank.

3) Notable alliances of Zomato

In recent years, Zomato has also partnered with various companies like Uber Taxi, London & Partners as well as online or electronic payment companies such as Visa and PayPal .

These partnerships have also played a significant role in enhancing the Business model of Zomato .

Having partnered with London & Partners, there were various ways in which the company aided Zomato. Some of them are specified below-

• Finding a location to set-up an office
• Assisting in staff hiring and, management recruitment procedures
• Work placements and market research
• Providing useful advice on policies, legal systems, handling of accounts, etc.

Now, after going through different aspects of Zomato business model, the time has come to delve into its revenue generation strategies -

How does Zomato Make Money?

Zomato’s revenue took a significant leap this year as its valuation increased from $68M in the financial year of 2018 (FY18) to $206 M in the Financial Year of 2019 (FY19).

Various aspects of Zomato act as a contributory factor in the current generation of revenue. Following are some of the major factors-

• The commission earned due to delivery services constituted about 75%of the total revenue generated in the year 2019. This is equivalent to an estimated amount of $155M, almost four times more than $8M made last year.
• The newly introduced system of Zomato Gold provided complimentary food and beverage service to customers with gold-membership. This service alone generated about $30M in 2018 and $49M in 2019.
• The ticket sales for various events organized by restaurants in partnership with Zomato generate a certain amount of revenue in the form of commissions. At the same time, consultation provided by Zomato to various restaurants to improve their business also adds to the Business model of Zomato.
• Unlike the past few years, Zomato is now trying to balance and form an equilibrium between all its sources of revenue generation by not prioritizing advertising revenue more than the other sources. This again has been a contributory factor in the efficient Business model of Zomato.

Zomato is known to bring in massive revenue due to its various business operations , but most people are still doubtful of the actual revenue-generating system of Zomato.

The Business model of Zomato consists of various sources through which the application generates revenue. The following are some of the operations undertaken by the app-

Sources that play key role in helping Zomato make Money

1) Zomato Advertising

Zomato provides people, access to multiple restaurants and allows them to rate the quality of the business that these restaurants offer.

These ratings are often reliable and useful. Various restaurants can promote their businesses by posting banners and pictures on Zomato.

This advertising method proves to benefit not only for restaurants but also for the app itself.

2) Zomato Subscription

Restaurants pay a certain amount of money to Zomato in exchange for various analytic tools and services provided by Zomato.

The food-based app has a variety of analytic tools and databases of information about the consumer through the use of cookies.

3) Zomato Event Organization

Zomato also organizes various events and food-based festivals by collaborating and partnering with multiple restaurants across the world.

The attendees pay a specified amount for the ticket. Zomato receives a certain percentage of the money collected. Hence, this aspect also proves to be very helpful for the app to generate revenue.

4) Zomato Food Delivery Services

Other sources of revenue for Zomato include Online food delivery service.

Zomato charges a certain sum of money called commission from restaurants in exchange for food delivery services.

5) Zomato Gold

Started in April 2018, Zomato Gold offers premium services based on membership.

In the facility, customers with gold-membership receive complimentary food and beverages from partnered restaurants.

Statistical analysis of Zomato’s revenue sources

As mentioned earlier, the Business model of Zomato is highly efficient, involving numerous sources which play a crucial role in generating revenue.

Following are some of the helpful statistics in understanding the Business model of Zomato-

• Restaurant Advertising and marketing constitutes about 72% of the total revenue.
• Event advertising contributes approximately 4% of the revenue generated.
• A total of 12% of the total revenue is generated by the ticket which is sold during events organized by Zomato.
• Consulting services and online-food delivery services constitute about 3% and 2% respectively.
• Zomato Gold and other developed services are generating 7% of the total revenue to the customers.

Wrapping it up!

Zomato has wholly changed the functioning of the food and restaurant industry by bringing in the concept of creating universal access for various restaurants and cafes.

Zomato makes available outlets based on the location, choice of cuisine, and the budget specified by the clients. It also provides online-delivery service to customers which makes the process of “ordering food” smooth and efficient.

Zomato also proves to help enhance the business models of various restaurants, bistros, and cafes by providing them consultation as well as the chance to promote their business by uploading pictures and posters on the Zomato application. Zomato also organizes various events and festivals in partnership with multiple restaurants to generate revenue not only for themselves but also for the restaurants involved.

The Business model of Zomato is well-organized and orchestrated, encompassing the various aspects which act as revenue sources for the company.

Restaurant advertising, event advertising, ticket-selling during organized events as well as specialized services like Zomato Gold and Piggybank are some of the significant revenue-generating sources of Zomato. The food-based application not only focuses on advertising but also provides equal importance to other sources which are the primary reason why Zomato earned five times the revenue earned this year in comparison to the previous financial year.

Intending to enhance the revenue-generating system as well as to develop the services provided, Zomato also partnered with various companies this year, creating helpful and beneficial alliances.

These include Uber Taxi, PayPal, and Visa. All these reasons make Zomato one of the most efficient applications of recent times.

So, how effective, profit-driven and inspiring do you consider the business model of Zomato? Share with us in the comments below.

Liked this post? Check out the complete series on Business Models

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About Hitesh Bhasin

Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

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Table of content

Introduction

Zomato's origins, working of zomato explained, zomato business model, zomato's value propositions, zomato's revenue sources, what does the future hold for the food industry and zomato, business model of zomato | complete guide.

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We've all probably seen people standing in lines and perusing restaurant menus to order lunch at least once in our lives. 

Who would have guessed that the concept would spawn Foodiebay, a forerunner to Zomato, one of the world's largest food aggregators?

Assume a person becomes suddenly hungry but has no idea what to order or where to order from. Bam! Then there's Zomato. 

They can visit the website, look at different restaurants, read their reviews, and then order what they like best. They'd probably find the delivery at the door any minute now.

The journey with Zomato appears to cover it all, from exploring restaurants to reading reviews to food delivery or dining out. 

But what exactly is Zomato, and what is the Zomato business model? How does it work in practice? How does it generate revenue?

Let's take a closer look at this food tech unicorn's business model.

Zomato's seed was planted about 15 years ago. The idea was born in 2008 in the minds of three passionate foodies tired of standing in long lines. 

The desire to have digital access to all restaurant menus in one place and make them available to all gave birth to Zomato. 

That idea was their baby, and it has now grown into a vision that motivates a team of over 5000 people every day.

Zomato did not start as Zomato. It began as 'Foodiebay,' an online restaurant directory. 

Deepender Goyal, the CEO, felt the need to change the name because it sounded too similar to 'eBay,' and he envisioned creating his own distinct identity. 

As a result, the christening ceremonies took place, and it has been known as Zomato ever since.

Customers use the website or app to search, discover, and explore various restaurants to order meals or reserve a table for dining out. 

Restaurant owners receive the order request and then dispatch the order after it is prepared. 

The order is picked up by a delivery partner chosen by the proprietary platform's algorithm, which searches for the closest and most suitable delivery personnel. 

Delivery personnel are not employees but rather partners in the company, and they can accept or decline a delivery job.   

It is another aspect of the Zomato business model, where the company has more partners for different jobs. 

When the job is accepted, the delivery service providers will deliver it to the specified location. 

Customers can pay when they order or when they receive their order. They then leave reviews, which help Zomato improve its services and other customers make informed decisions when placing orders. 

Zomato delivery operating model can be broken down into three steps:

• Customers use Zomato's app to place orders from existing restaurants and food establishments partnered with Zomato.
• Zomato contacts the nearest and most suitable delivery partner to fulfill the customer's order.
• The delivery partner delivers the order. Zomato and its delivery partner receive commissions on the order.

Zomato's success is based on the Zomato Business Model. 

Zomato's business model revolves around providing food delivery services, information, user reviews, and menus of partner restaurants. 

Zomato has paved the way for other online food delivery apps. 

The following are the key components of the Zomato business model:

Customer Segments: Zomato's customer segment is divided into three parts:

• Local restaurants: Zomato allows restaurants to be visible to their target audience.
• Users: Zomato caters to users who want to find restaurants or specific cuisines in their area. Zomato is a one-stop shop for users who enjoy home delivery.
• Reviewers:  Reviewers are Zomato's content contributors. They actively review food and places and provide users with relevant information in textual and graphical form.

Zomato Provisions: Zomato serves as a link between customers and partner restaurants. They have created a well-thought-out pricing model for their delivery service. 

Zomato Gold is a membership club that allows customers to get exclusive discounts at Gold-tagged restaurants, pubs, and lounges across the country. 

This feature of the Zomato Business Model has made it more customer-oriented. 

As a result of the benefits it has for consumers, over 1.4 million users have subscribed to it, according to Zomato's datasheet.

Alliances of Zomato: Collaborations with major brands such as Uber Taxi, Visa, and PayPal have bolstered Zomato's business model. 

The partners have helped Zomato in various ways, including finding a location to set up a shop, hiring and other procedures, job placements, market research, dealing with operational, accounting, political, and legal issues, and so on.

Zomato is well-liked for the way it works. Zomato is built on the QAAV model, which means it promises and delivers Quality, Accessibility, Affordability, and Variety to its customers and partners. 

The following are Zomato's value propositions, which make it unique and admirable:

• Improving food quality: Zomato is completely committed to maintaining a neutral platform. Hyper pure consistently assists food establishments in maintaining high standards. Zomato's Hyper pure initiative is an innovative way for the company to bring fresh, squeaky clean, high-quality ingredients and kitchen supplies to its partner restaurants. The Food Hygiene rating is the most coveted and well-known quality symbol among its partner restaurants.
• Increasing customer accessibility: Since its inception, Zomato delivery has been growing and expanding its reach to more and more cities. They are aggressively expanding their services. They now take table reservations, provide corporate catering, and feed India.
• Ensuring affordability:  The success of Zomato gold demonstrates Zomato's efficiency in providing a diverse range of exciting options. Zomato constantly strives to be the best and leaves no stone unturned. They ensure affordability without sacrificing profits.
• Assist in the selection:  Zomato believes in assisting its customers in discovering new tastes and experiences that transcend geographical boundaries. They present the best information to their customers in the most readable format and assist them in making informed decisions.

• Commission on delivery services: These commissions accounted for approximately 75% of Zomato's total revenue in the fiscal year 2019. It amounted to $155 million, four times their previous earnings. It is the primary aspect of revenue generation in the Zomato business model.
• Zomato Gold:  Zomato Gold is based on a freemium model. The concept aims to provide subscribers with premium services. This system allows customers with gold memberships to enjoy complimentary food and beverage services. This service generates hefty amounts of revenue and is one of the highlights of the Zomato business model.
• Ticket sales: In the form of commissions, ticket sales for various events held in restaurants in collaboration with Zomato generate colossal revenue for Zomato. Zomato also charges for the consultation services that they offer to its partners. It is yet another part of the Zomato business model for revenue generation.
• Promotions: Not just the Zomato business model, but every business model has space for tie-ups and promotions. Zomato is constantly promoting different restaurants. Zomato charges partners for increased exposure and visibility through banner advertisements. 

Zomato, in 2022, published the Mid-COVID Report for India. 

Their report shared the finding that the food delivery sector has recovered with some regional flavors and, in fact, grown beyond pre-COVID levels in a slew of large pockets across the country, with some affluent residential areas leading the way. 

Because of the lockdown and everything returning to the home trend, many premium restaurants were becoming receptive to the idea of online delivery, attracting many affluent customers. 

In fact, during the lockdown, customers began to rely more heavily on online deliveries. People spent more quality time with their families and loved ones, so group ordering became more common. 

Zomato has transformed the food industry by making the concept of universal access a reality. We have discussed the Zomato business model in-depth and analyzed every aspect. 

If you want to build an online marketplace like Zomato, you can connect to AppsRhino for the same. 

AppsRhino is a mobile app development company that powers on-demand mobile and business apps for entrepreneurs and enterprises.

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First things first. Why do you need a business plan?

The restaurant industry is still known to be an unorganized one. Which is exactly why a business plan needs to be in place. It also is important to have a business plan so you can show your investors where their money is being put and even to get that bank loan you’ve been waiting on. A business plan is the blueprint for your restaurant where you chalk out the restaurant’s goals – short and long term ones, what your vision is for the restaurant and how you plan to make it a success. There are plenty of modules, guides and even softwares that can help you make these plans. But before any of that, you need clarity on what you’re going to do.

You need to define your business for yourself and for the investors.

What kind of restaurant will yours be? Cafe, fine dining, casual dining, QSR, or any other.

What cuisines will you serve? Based on location, demographic and your own business interest, understand what cuisines will work for your restaurant.

What will be the USP? A unique theme or cuisine, events, or anything else.

A cafe serving American cuisine with a circulating library within the cafe and live music on Friday evenings. Here, the library and live music can be your USPs and something that customers will be drawn to.

Key factors to succeed

In all businesses, there are a few key factors that ensure the success or failure of it. It’s not different with the restaurant business as well.

Location – List of ideal locations and why you want to open a restaurant there.

Demographic – The kinds of people you’re targeting – age group, floating population or locals.

Staff – Are you hiring experienced staff or new ones to be trained? What are your staff retention plans?

Food costs – How are you going to control food costs? Have you spoken to multiple suppliers before finalizing on the ones that would work out for your business?

Investors need to know your strategy to success. We mentioned key factors earlier, but without a strategy, they are only just points on paper. From operations to staff, you need to have a clear strategy that you intend to follow.

Operations – Number of people required in various shifts, whether you’re going to be open all day or just for lunch and dinner services, supplier management, etc.

Home delivery – Do you have enough staff to run delivery operations? You can sure improve on profit margins, but can you handle the volume? Will it work in the locations ideal to run the restaurant in? Will you use a third party for delivery or in house staff? Will you go online or stay off it?

Costs – How are you pricing your menu – starting low and bump it after 6 months, or keep it stable for a year and raise it according to market later?

Financial analysis

A business plan cannot be complete without a mention of financials. Even if it isn’t elaborate, you need to cover the important points. Cash flow, profit and loss statements, risk analysis, pricing, cost control, operational costs, sales forecast, quarterly and annual growth rate, etc. It’s not easy to work on financials if you don’t have experienced people working with you to guide you in the right direction. There is a lot to consider at the beginning so you don’t suffer later in the business.

Future plan and vision

Even a restaurant, however unorganized the industry may be, should have a vision and a plan to achieve set goals.

Expansion – Do you plan to open other outlets in other locations of the city? Financially, will you be in a position to do so in the time set to achieve this goal? Do you want to expand the brand or open different kinds restaurants?

Diversification – Do you intend to add cuisines? Or events? How else do you plan to keep your restaurant relevant?

A good business plan should basically talk about what your restaurant will be like on paper and how you intend to run it bearing in mind the financials and other practical aspects. You must have an executive summary for your business plan where you condense everything into just two or three pages. A lengthy powerpoint presentation is outdated and tiresome to compile as well as read. Keep it simple and as clear as you can.

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We are excited to announce the launch of Zomato Wings, a platform to connect investors with restaurants.

Another step towards helping the restaurant ecosystem get back on its feet quickly.

The bar at any restaurant is underrated and sometimes undersold, even. More often than not, it acts as a buffer…

A Detailed Zomato Case Study-2023

Few brands have expanded exponentially after their launch. One of them is Zomato.

How did they manage to achieve this success?

What did they do to improve their customer base?

What was Zomato’s marketing strategy which they used to attract customers?

We believe that Zomato’s digital marketing strategy played an important role in achieving all these.

This article evaluates a few e-marketing strategies and a detailed Zomato case study.

Zomato Case Study- About Zomato Company

When Zomato started, it aimed to become the best restaurant search and discovery platform.

It had the names of different restaurants, menus, costs, reviews, and other essential details. It offered in-depth information on more than 1.4 million restaurants across 23 countries.

Over the years, it has become a popular online food delivery platform. Now customers can order food from their favorite restaurants by using their website or app.

Zomato has many delivery executives who pick up the order from the eatery and deliver it to the customer’s address.

How was Zomato Started?

Zomato is an Indian group founded by two IIT graduates, Deepinder Goyal, and Pankaj Chaddah, in Delhi NCR in 2008.

Once Deepinder saw his colleagues ordering food from different restaurants. That was when Deepinder came up with bringing these restaurant menus online.

One day they noticed their colleagues standing in a long queue in the cafeteria waiting for lunch.

So they thought about how much time people could save if they did not have to wait and get their favorite food delivered to their doorstep whenever required.

It is how they started the online food delivery service under “FoodieBay” and renamed it “Zomato.” In the initial stage, FoodieBay listed restaurants in Delhi and NCR. But, they soon grew their business in other metro cities like Kolkata and Mumbai.

As FoodieBay started attracting more and more customers, the founders decided to revamp its name to appeal to audiences outside India too. So then they changed the name of FoodieBay to “Zomato.” By 2016, Zomato had its sophisticated app doing food deliveries from registered restaurants.

Zomato Business Model

The success of Zomato lies in its unique Business Model. Zomato is an app whose business model works around food supply online, providing knowledge, user reviews, and menus of partner restaurants. Here are some of the essential components of Zomato’s business model:

1. Customer segments-  The customer segment of Zomato has three different components: Local restaurants, reviews, and users.

2. Zomato provisions-  Zomato has created a well-designed valuation model for its food delivery services. Zomato Gold & Piggybank has enhanced the standard of services that Zomato offers.

3. Alliances of Zomato-  New partnerships with several big names like Visa, Uber Taxi, and Paypal have improved the business model of Zomato.

This online food delivery app provides a discount to advertise its usage and improve its customer base, considering the tough competition in the market. It’s mainly a selling strategy. Zomato soon started its service in the Cloud Kitchen industry too.

Competitors of Zomato

With various new companies launched in the last decade, the food delivery industry has become one of the largest online platforms.

Thanks to companies like Zomato, Swiggy, Uber Eats, FoodPanda, etc., they are changing the food industry quickly.

The online food delivery system is booming in metros and Tier II and III cities. All credit goes to these significant apps in the market.

The online food delivery industry is rapidly evolving and attracts vast money. However, growing competition and unstable growth policies have resulted in few casualties.

Because of enormous losses, companies like TinyOwl and Eat Fresh had to shut their doors.

Even FoodPanda, a popular food delivery app with a presence in over 13 countries, has been attained several times, initially by Delivery Hero and followed by OLA.

However, the company is still struggling to maintain its position in the online food delivery industry.

Zomato Partnership Strategy

Zomato is continuously working with the government to ensure that its services run smoothly without any hindrance.

Furthermore, it makes sure to support millions of people who are part of their food delivery network by earning money to cover the loss if they have lost their money due to some crisis.

Zomato has always been a leader in identifying the importance of videos and using them to its benefit on the YouTube platform.

Zomato plays short, lively, and unskippable video ads on YouTube with a “call-to-action .” It is proven that video ads play an essential role in Zomato’s advertising strategy.

Zomato Digital Marketing Strategies

Zomato is active on Twitter, Instagram, and Facebook. It has 757K followers, 1.5 million followers on Twitter, and more than 737K followers on LinkedIn.

Zomato communicates with its customers by creating posts on popular subjects.

The brand is aware of its audiences, likes, and dislikes. As a result, it supports material that people love to share, discuss, and reconsider.

To engage customers online, it utilizes popular topics and publishes simple pictures.

During the 2016 Olympics, Zomato promoted its brand on Twitter. The brand used Olympic rings made of coffee and claimed they would receive the gold medal if drinking coffee were a sport.

Another hot subject that Zomato targeted was The “Pokemon Go” video game. Zomato started earning from that too. The brand used the famous Pikachu to promote its brand on Twitter.

Connecting with the customers by Zomato was aided by positing popular themes. Users possibly don’t want to contemplate too much while using social media. Individuals use social media to enjoy and view humorous content.

Zomato’s digital marketing strategies keep on getting adjusted with new trends emerging. They find new methods to attract customers’ attention. Currently, they are doing a fantastic job.

However, they will benefit considerably if they put forth a sustained effort.

These people are skilled enough to make the most of the Email marketing tool. One of the most innovative and effective strategies is Zomato’s email marketing.

Zomato keeps its customers loyal to its company by utilizing appealing subject lines and a drive to action.

The brand ran an email marketing campaign on Amazon Prime Video with the theme of the legendary series Mirzapur Season 2. Zomato used the subject lines from Mirzapur.

In addition, it created a CV for Biryani as a vital part of one of its most prominent email marketing methods. Food-related terms like, for example, “Curriculum Vitae of Biryani” was showcased by Zomato.

In addition, it used the CTA “hire immediately” instead of “order now.” It is the reason why Zomato’s email marketing strategy performed so well.

Regarding SEO, Zomato has put a lot of effort into this field. According to Ubersuggest data, Zomato ranks for around 7,544,348 keywords on June 2023. Its organic traffic is 77,874,441 users every month.

The company lists the top keywords in its niche and designs a webpage for those. This indicates to the search engine that these pages are apt for the user’s search query. It is a great strategy to ensure that your website ranks top.

As of June 2023, Zomato has 12,738, 685 backlinks from different high-authority domains. It, too, helps Zomato to rank higher.

They are active on Social Media too. Zomato has 829K followers on Instagram and around 1.5 M on Twitter.

Zomato Target Audience

Zomato’s target audience comprises people between 18 and 35 with smartphones and well-versed in using different apps.

It focuses on attracting two customers, one who prefers to eat out and another who wants to order food from outside and deliver it to their home. These groups frequently coincide.

The Zomato Gold program offers incentives for those who eat out and offers food delivery service for those who want the food delivered at home.

Individuals who work and want their food delivered to their office, students who live in hostels and need food, those who lack time to prepare their food, and those who occasionally enjoy eating outside under this group.

Digital Marketing Channels Used by Zomato

Zomato uses Google AdWords for its search ad campaigns. It targets terms like “Food,” “Restaurant names,” “Online food ordering,” and many others.

It focuses on attracting people who want food delivered to them. It also runs Google Display ads to target individuals on apps and websites from 3rd parties.

Influencer Marketing Strategy by Zomato

Zomato has advanced the “hyper-local marketing” idea by advertising its material in regional languages and contacting micro-influencers.

It, in turn, increases the credibility of Zomato by enabling them to connect with more and more audiences.

Zomato has focused on Influencer Marketing in its marketing strategy as it identifies its potential.

Whether micro or macro-influencer, Zomato is not afraid to move further and leverages its disrepute to expand its user base.

All of us are aware of Zomato’s humorous takes on different scenarios through its tweets.

Zomato offers content that will make its customers smile, no matter whatever issue they are dealing with currently or the one they encounter regularly.

Moreover, its humor spreads fast and has a powerful impact.

Memes play a significant role in social media, and the brand has mastered the “meme marketing” method as it recognizes its importance.

As a result, the food delivery company attracts a lot of organic traffic. Thanks to the content marketing strategies followed by the brand, which ultimately helps to increase its revenue.

Acquisitions

• Zomato has acquired 12 startups worldwide.
• In 2014, during July, Zomato made its initial acquisition by purchasing Menu-mania for an undisclosed amount.
• The company pursued other purchases, including obedovat.sk and lunchtime.cz, for US$3.25 million.
• In September 2014, the brand acquired a Poland-based restaurant search service, Gastronauci, for an undisclosed amount.
• In December 2014, it attained the Italian restaurant search service, Cibando.
• In 2015, it bought Urbanspoon, a Seattle-based food portal, for an estimated US $60 million.
• Other acquisitions of 2015 by Zomato include Mekanist in an all-money deal, MapleGraph, the Delhi-based startup that built MaplePOS, and NexTable, a restaurant and table reservation management platform.
• In 2016, it bought Sparse Labs, a logistics technology startup, and Runnr, a food delivery startup, in 2017.
• In September 2018, it bought TongueStun, a Bengaluru-based food e-marketplace, for around US$18 million in cash and stock deal.
• In December 2018, it bought a Lucknow-based startup, TechEagle Innovations, focusing on drones for an undisclosed amount. Zomato stated that the acquisition would assist in starting drone-based food delivery in India, establishing technology targeted toward a hub-to-hub delivery network.
• On 21st January 2020, Zomato bought its competitor Uber Eats’ in India, providing 10% of the total business to Uber Eats.
• On 29th June 2021, the company signed an agreement with Grofers to invest about US$120 million in the online grocery market by purchasing 9.3% stakes in the company.
• In 2022 during June, Zomato attained Blinkit for US$568 million in an all-stock deal.

Investors Leaving Zomato 

Uber, which attained 7.8% of Zomato shares when Zomato bought its Indian subordinate of Uber Eats, left Zomato on 3rd August 22.

The shares were sold at around $392 million to protect Uber against the losses. ICICI Prudential Life and Fidelity purchased the Zomato stakes.

As per the reports published on 4th August 2022, Tiger Global sold half of its Zomato shares.

According to the news, the American Investment company sold the shares between 25th July and 2nd August 2022.

As a result, tiger Global had a total of 5.11% shares in Zomato, now 2.77% after the sale.

What are the Future Plans of Zomato?

Online food delivery platforms, Zomato and Swiggy, hit an all-time high in sales volumes during 2021, as most people stayed indoors due to an increase in Covid-19 cases.

Zomato said it earned more than 100 crores in Gross Merchandise Value (GMV), which shows the value of food ordered through this platform- compared to Rs. 75 crores it had achieved the previous year on 31st December.

While Zomato’s sales have been rising, the brand can still not make gains due to huge payments led by marketing and discounts.

It posted a total loss of Rs. 1,222 crores for March, a rise of about 50% since the previous year.

However, according to analysts, the food delivery business has a vast scope as it is estimated that the brand will achieve a turnover of $110 billion by 2025.

Zomato’s revenue increased 123% to Rs 4,109 crore in the financial year of 2021-22.

On the other hand, the brand’s loss increased by 24% to Rs. 1,098 crores. The brand’s annual report said its average monthly transacting customer base increased by nearly 116%.

The online food delivery giant, Zomato, narrowed its focus on three essential areas of online food ordering and delivery: food supply to restaurants through “Hyperpure” and fast commerce.

So Zomato started focusing on three vital areas: online food ordering and delivery, Hyperpure, and Quick commerce.

The brand’s online food delivery business is stable and headed toward productivity. As a result, online food delivery has enormous scope for growth in the future.

However, while restaurant food intake has risen in the last few years, its overall penetration in India is still drastically low compared to its worldwide competitors.

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Zomato's future plan - focus on three key areas

Online food delivery platform Zomato has decided to narrow its focus on three key areas of food ordering and delivery; supplies to restaurants through 'Hyperpure' and quick commerce, company Chairman Kaushik Dutta said on Tuesday.

In his address to shareholders at the company's annual general meeting, Dutta said the move was part of strategy to focus "only on areas that have the potential to become meaningfully large businesses ten years from now".

In FY22, he said Zomato was able to achieve strong top line growth while keeping its "adjusted EBITDA burn under control", despite multiple challenges such as disruptions due to Covid-19 pandemic, macro-economic uncertainty, rising inflation, fuel prices, among others.

This year after reflecting on the strategic priorities as a company, given the size and scale of the platform now, Dutta said it was decided that the focus would be only on areas that have the potential to become meaningfully large businesses ten years from now.

Subsequently, he said Zomato would narrow its focus to three key areas -- food ordering and delivery; Hyperpure and quick commerce.

Zomato's core food delivery business is stable and headed for profitability, he said, adding in India food delivery still has a large runway for growth.

While restaurant food consumption has increased in the past few years, its overall penetration in India is still significantly low as compared to global counterparts, he reasoned.

On Hyperpure -- Zomato's supply platform for restaurants for fresh items, he said the company is now starting to see strong adoption of its services by restaurant partners.

"We think that this business has the potential of becoming as large or even larger than our food delivery business because the addressable market here is potentially larger than food delivery," he added.

On quick commerce, he said the acquisition of Blinkit was completed this month and the integration of the two teams has started.

In June this year Zomato had announced acquisition of Blink Commerce Pvt Ltd (formerly known as Grofers) for Rs 4,447.48 crore in a share-swap deal as part of its strategy of investing in quick commerce business.

Dutta said Zomato considers quick commerce as a natural extension to its core food delivery business and increases its addressable market manifold.

It has the potential to help the company build a more profitable business by cross leveraging existing customer base and increase hyperlocal delivery fleet utilisation, he added.

"With this, we now have a clear execution plan around these three businesses and our focus as a team will be to get these businesses to meaningful scale and profits," Dutta said.

He also said Zomato's dining-out and certain other segments saw a revenue decline of 15 per cent in FY22, due to discontinuation of most of its international operations as well as certain non-core businesses.

The dining-out business was adversely impacted in FY22 by Covid-related lockdowns.

He also said the company is making progress in its efforts for adoption of electric vehicles with around 4,500 active EV based delivery partners and around 18 per cent of orders delivered on bicycles as of March 2022.

In reply to shareholder queries, Zomato founder & CEO Deepinder Goyal said the company does not expect to make any other strategic minority investments for the foreseeable future as it has made all the investments that needed to for its future plans.

On safety of delivery partners, he said it has always been a priority for Zomato and "no compromises have been or will be made here", while also asserting that the platform does not incentivise riders to be on time.

Goyal also said Zomato will put a phone number on the bags of its delivery partners for people to call and report if any one of them were found to be speeding.

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Zomato’s quick commerce unit Blinkit eclipses core food business in value, says Goldman Sachs

Goldman Sachs said in a report late Thursday that Indian food delivery giant Zomato’s quick commerce arm Blinkit is now more valuable than its core food delivery business, as per the bank’s sum-of-the-parts analysis.

The investment bank estimates Blinkit’s implied value at 119 Indian rupees per share ($1.43) or about $13 billion, while Zomato’s food delivery business is valued at Rs 98 per share. Goldman previously pegged Blinkit’s valuation at $2 billion in March 2023.

Blinkit’s valuation surge is driven by its strong growth potential in India’s fast-growing quick commerce market. Goldman Sachs forecasts Blinkit’s gross order value (GOV) to grow at a compound annual growth rate (CAGR) of 53% between the financial years 2024 and 2027, outpacing the overall online grocery market’s projected CAGR of 38% during the same period.

Zomato acquired Blinkit for less than $600 million in 2022.

The investment bank believes that India’s quick commerce market is poised for growth due to several factors, including a large unorganized grocery sector, high population density in urban areas, and a favorable ratio of delivery costs to average order values. These dynamics have allowed Blinkit to offer competitive prices and fast delivery times, driving customer adoption.

Blinkit per share implied value now larger than that for food delivery in GS’ SOTP (Goldman Sachs)

Quick commerce, which boomed globally during the pandemic, has since cooled in many markets. India, however, continues to buck this trend. Unique factors such as a large unorganized retail sector and favorable demographics, coupled with attractive unit economics, is setting India apart , according to many analysts.

India is poised to leap from unorganized retail directly to quick commerce, potentially bypassing the modern retail phase seen in other countries, HSBC analysts wrote in a note this month. Quick commerce’s success lies in its ability to mimic the attributes of traditional kiranas (neighborhood stores), such as catering to small, frequent purchases and offering a wide range of SKUs. With Indian kitchens requiring regular top-ups and limited storage space, quick commerce’s proximity and expanding product range make it an attractive alternative to both kiranas and modern retail.

Goldman Sachs estimates that India’s addressable quick commerce market in the top 50 cities alone stands at $150 billion as of 2023. Despite the presence of well-capitalized competitors such as Swiggy and Zepto, the bank believes the market is large enough to accommodate up to five profitable players by the fiscal year 2030.

The report suggests that Blinkit is expected to achieve EBITDA breakeven by the June quarter of 2024 and generate a higher EBITDA margin than Zomato’s food delivery business by the fiscal year 2030.

The surge in Blinkit’s valuation will likely have implications for Zepto and Swiggy, which plans to make its public debut this year.

Swiggy, which operates the instant commerce platform Instamart, disclosed this week that it had received approval from its shareholders for an IPO, where it expects to raise about $1.25 billion . Swiggy was valued at $10.7 billion in its most recent private financing round in early 2022.

Zepto, backed by StepStone Group and Y Combinator Continuity, is also fiercely competing with the two firms for a slice of the Indian quick commerce market. The Mumbai-headquartered startup was recently on pace to achieve $1.2 billion in annual sales .

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How & Why Delivery Giant Zomato Is Planning To Enter The Catering Business

Delivery giant  Zomato , which began in 2008 and went public through an IPO in 2021, is planning a big move  to expand its business.

What Is Zomato's Big Plan?

Zomato plans to diversify into the catering business. The company is also looking to add more offerings to its loyalty programme, Gold, despite concerns about the potential impact on profitability, Rakesh Ranjan, CEO of food delivery, said in an interview, as per an ET report.  

Also Read:  Rakesh Jhunjhunwala's Stock Prediction For Zomato Comes True

Why Is Zomato Entering Catering Segment?

Zomato is planning to enter catering the business by leveraging its established network of restaurant partners as part of a broader strategy to service large orders.

“ If I want to have a gathering of 20 people at home…right now food delivery does not lend itself well into that kind of a use case. It's winter, I want to have a party, or I want to do a small picnic in the local park. There are tons of such use cases in the offline world. But the food delivery does not lend itself into it very well. It's only about tying some of those loose threads…so that's what we're going to be focusing on,” Ranjan said.

Also Read:  Zomato Appoints Its First 'Chief Fitness Officer' For Employees Health

How is Zomato expanding its business?

This year, in June, Zomato  introduced the multi-cart feature, allowing users to order from multiple restaurants at the same time. This rolls up into  Zomato’s broader strategy to introduce more use cases for food delivery  in an effort to grow its total addressable market. Ranjan said Zomato is seeking to build “occasions” for customers to order more by initiating operational changes and through marketing campaigns.

“That's one clear vector that we are going to be working on. We believe that occasional orderers, low frequency orderers, if they're able to associate more occasions with Zomato and food delivery, then that's a large base that we can address,” he said, as per the report.

Ranjan added that “building occasions” would be at the centre of Zomato’s new initiatives going forward.  The company also launched ‘Zomato Everyday’ earlier this year to target value-conscious, bottom-of-the pyramid customers.

On the other hand,  Zomato  is scaling down on some of its earlier initiatives that haven’t performed as per expectations. One such feature is Zomato Legends, under which the company has started intercity delivery of food. “We are constantly trying to evaluate many opportunities and have almost nil sunk cost bias. If something doesn't work, we don't need to stick to it for very long,” Ranjan said.

“Legends was done in a particular way. It was loved by our customers, but it wasn't helping us scale. In fact, for a good set of customers, it wasn't helping solve their hunger pangs because the food was getting delivered the next day. So, it had to be reengineered a little bit,” he added.

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Zomato testing a new faster food delivery service but at an extra cost: Report

Zomato is experimenting with a new priority delivery service, enabling customers to receive their orders faster at an additional cost. the service is presently being tested in bengaluru and mumbai, with customers offered the option to pay an extra fee for quicker delivery times..

• Updated Apr 25, 2024, 1:33 PM IST

Zomato is currently testing a priority delivery feature that will allow customers to receive their orders faster for an additional fee, according to a report by Moneycontrol. The feature is being tested in Bengaluru and Mumbai, and requires customers to pay an extra Rs 29 for a 16-21 minute delivery, compared to the standard 21-minute delivery time. This additional charge applies even to Zomato Gold members.

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• Zomato shares jump 5% to hover near all-time high; is it time to book profit?
• Zomato orders to cost more: Delivery firm hikes platform fee by 25%, suspends Intercity Legends service

Alongside these changes, Zomato is also revising its intercity delivery service, Legends, which launched in 2022. The service is being reworked due to issues with the delivery method, and plans to expand it are currently on hold. Zomato is also facing a lawsuit over unfulfilled promises related to Legends.

Zomato Hikes Platform Fee

Zomato has also increased its platform fee by 25 per cent, making it Rs 5 per order. This fee is a flat charge applied to all orders. The increase comes just a week before Zomato is set to announce its financial results for the March quarter.

The company first introduced a platform fee of Rs 2 in August last year, which was later increased to Rs 3. Following a surge in food orders on New Year’s Eve, the fee was further increased to Rs 4 per order in January. 

This fee increase affects customers in Delhi-NCR, Bengaluru, Mumbai, Hyderabad, and Lucknow. Swiggy, a competitor of Zomato, already charges a platform fee of Rs 5, with some customers reporting a fee of Rs 10.

In addition to the fee hike, Zomato has temporarily suspended its inter-city food delivery service, Intercity Legends. A message on the ‘Legends’ tab on the Zomato app reads, "Enhancements are underway. Please stay tuned as we will be back to serve you soon.”

Zomato reportedly handles about 85-90 crore orders annually and saw a 30 per cent year-on-year increase in adjusted revenue in the December quarter.

Recently, Zomato received a GST demand and penalty order totaling Rs 11.81 crore for the period of July 2017 to March 2021. The order, issued by the Additional Commissioner of Central Goods and Services Tax, Gurugram, is split into a GST demand of Rs 5.9 crore and a penalty of the same amount. This is for export services provided by Zomato to its foreign subsidiaries during the specified period.

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Blinkit now more valuable than Zomato's food delivery biz: Goldman Sachs

Blinkit, formerly grofers, was acquired by zomato in 2022 in a distress sale via an all-stock deal for $568 million.

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Samsung ties up with blinkit to deliver galaxy s24 series in select cities, zomato plans d2c expansion of blinkit to compete with ecommerce giants, man gets kebab in gurugram from lucknow in less than 30 mins, sues zomato, 'all riders wear red': zomato drops green colour from pure veg fleet, ordering food from zomato to get costlier as the company hikes platform fee, cred to roll out payment checkout terminals to merchants this year, delhi hc allows request by go first lessors for aircraft deregistration, apsez's vizhinjam port gets nod to run as india's first transshipment hub, india receives oil cargo in russian scf tanker after brief halt: report, shaurya aeronautics, russian firm awarded management of matta airport.

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First Published: Apr 26 2024 | 6:00 PM IST

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