Amid Debate Over Threat From ONDC, Zomato Says Will Watch Progress Closely & Learn

Recognising the growing competition in the food and grocery delivery market with the advent of the government-backed Open Network For Digital Commerce (ONDC), Zomato said on Friday (May 19) it welcomed any change or innovation which would ultimately help the restaurant industry grow.

“We continue to watch the ONDC progress closely and learn from it,” Akshant Goyal, CFO of Zomato, said in the shareholder letter released after the company reported its financial performance for the quarter and year ended March 2023.

During the earnings call, Goyal said that the market was fairly competitive and there was a lot of innovation happening across the board. “So, I think we continue to watch it and learn from it and see how we can run our business better to make sure that we continue to grow.” 

Goyal added that despite the growing competition, Zomato was not planning to make any changes (referring to its commission rates) which cost its growth. Given the penetration in the market is low, there is room for everyone to grow, he said.

Earlier this month, Inc42 reported how food items were available at a significantly lower price on ONDC compared to Zomato and Swiggy, which charge a commission between 18%-24% from partner restaurants.

Following the report, there was intense debate on social media about the potential of ONDC to end the Zomato-Swiggy duopoly in the food delivery market. 

However, brokerages like Kotak Institutional Equities, Jefferies, and Motilal Oswal said that there was no immediate threat from ONDC to the two food delivery majors.

“…we see ONDC as a potential threat to Zomato only if it meaningfully scales up across categories, allowing it to achieve greater efficiency compared to the walled gardens,” said analysts at Motilal Oswal.

Meanwhile, Kotak said that it saw only a ‘limited impact’ of ONDC on Zomato in the near term. IT added that it was difficult to predict the long-term impact. 

It must be noted that the current discounts on ONDC, which created the buzz, are likely to be available only for a limited period. 

On the other hand, ONDC continues to onboard more restaurants on its platform. In the latest, pizza chain Domino’s said it was set to join the open commerce platform.

Meanwhile, Zomato’s food delivery business remain muted for the third consecutive quarter as its adjusted revenue declined to INR 1,530 Cr in Q4 FY23 from INR 1,565 Cr in Q3 FY23.

Zomato attributed the decline in the growth of its food delivery business to February being a shorter month and the shutdown of its service in 225 cities in January this year.

Helped by growth in its other business verticals and cost cuts, Zomato’s net loss declined 46% sequentially and 48% year-on-year to INR 187.6 Cr in the quarter.