“ Businesses aren’t built in a year; they take decades….”
If I had to guess, what tempted you more than the delicious cuisines available on Zomato, it would most likely be Zomato’s IPO. After all, the IPO of Zomato marks a watershed event in the Indian internet landscape. The Gurugram-based firm is one of many long-standing Indian unicorn startups to go public.
This blog will try to figure out the competitive landscape Zomato operates, its challenges, and future potential.
ZOMATO’S COMPETITIVE LANDSCAPE
In India, Zomato’s main competitor is Swiggy. The competition between Zomato and Swiggy has been neck to neck, which is evident from this comparison report.
Furthermore, Amazon is also targeting this segment and has already begun testing its operations. Assume Amazon tries to position itself as a platform with lower commissions and high discounts. In that case, it will easily attract restaurants and customers, extending Zomato’s vicious cycle of cash burn.
Hence, Zomato has no significant competitive advantage other than being a prominent player in the domestic market, as price wars continue to dominate the food delivery segment.
In the international context, Zomato’s main competitors include Doordash, Grubhub in North America; Delivery Hero, Takeaway.com, Deliveroo in Europe; Meituan in China; Grab, Gojek in Southeast Asia.
Interestingly, Europe, the USA and China are considered mature markets, unlike India, where internet services consumption is underpenetrated. Even then, every major company operating in foreign markets is making losses except Meituan in China, which is highly profitable. Still, Meituan’s case is different as it aspires to be the Amazon of services. It has positioned itself as a super-app in China by connecting users with local companies for food takeout, hotel bookings, and movie tickets, among other things.
Moreover, these mature market companies have not provided remarkable stock returns to their investors, as can be seen by this comparison study.
Hence, expansion in the overseas market comes with many challenges. So, unless Zomato isn’t going to offer something exceptional, its establishment as a chief player in international markets seems uncertain in the distant future.
THE POSITIVE ASPECTS OF ZOMATO
The above arguments might have discouraged those who would have invested in Zomato’s IPO, but there are many positives that Zomato possesses:
1. Strong Brand Image – Zomato has definitely won the Brand Wars in the Indian food-consumer market, as seen by its large following on social media outlets.
They’re witty, eccentric, and creative in a unique way. Furthermore, Zomato’s CSR activities, such as the Feeding India NGO and providing oxygen during the pandemic, have established them as a socially responsible company. Zomato’s frequent support to its delivery fleet has added to its positive brand equity in consumers’ minds.
With the kind of ecosystem, Zomato has maintained, it can even introduce a food niche-specific Social Media App and establish its presence in the creators’ economy.
2. Zomato Hyper pure – Zomato’s three business verticals include food delivery, dine-out, and hyperpure. Under Hyper pure, it supplies high-quality ingredients to restaurant partners at affordable prices. If everything works well, Zomato can enormously scale it up by incorporating additional variables and becoming a Shopify for restaurants.
3. Data Gold Mine – Zomato sits on heaps of consumer data collected through its food delivery business and customer reviews. Zomato may utilize this data to launch its own Cloud Kitchens and Restaurants and help create other strategic initiatives that, when paired with other variables such as those stated above, might transform Zomato into a profit-making engine. However, Swiggy, too, has almost the same amount of data. Hence, only time will tell that how this data gets used profitably and by whom.
WILL ZOMATO EVER BECOME PROFITABLE?
Consider Uber, which began as a ride-hailing platform but later realized that ride-hailing alone won’t be profitable, so they began to diversify into other segments such as delivery, transit, rentals, and so on, either by introducing their own applications or investing in other companies.
Hence, turning profitable only by operating in the food delivery segment is quite improbable. Zomato, too, has recognized this fact, as evidenced by its strategic investment in Grofers, an online grocery delivery platform. Hence, Zomato needs to introduce more innovative verticals that can become its revenue-generating sources ultimately turned into profits.
Zomato’s aggressive growth, investments, and acquisitions are likely to continue. One can’t even rule out the possibility of its merger with its major domestic competitor as both share a common purpose.
Zomato is a 14-year-old bright and competitive kid, parented by its primary stakeholders. With the highly qualified and able management, it can be said with certainty that they will make the best out of available resources and stand up to the expectation of their shareholders before the end of this decade.
People with eagle-eyes would surely have figured out that India is witnessing the foundation of super-apps that allows doing everything on a single platform, but that’s the story of another time.
Research Sources
Zomato’s DRHP
Economic Times
Financial Times
YourStory
Wikipedia
Crunchbase
Forbes
Inc42
Inc.com