SUMMARY
The food delivery majors are said to have seen a drop in market growth in the past few months
The order numbers have reportedly stalled at around 3 Mn
Swiggy, Zomato and UberEats have shifted focus to increase monetisation opportunities
The food delivery sector is reportedly witnessing a slowdown in the number of orders as compared to the last eighteen months. The sector has witnessed a 1-2% drop in monthly growth between August and October, because of consumer spending slowing down, according to an ET report.
The reduction in discounts and promotions by food delivery majors such as Swiggy, Zomato and UberEats have reportedly also contributed to this slowdown. The report added that the average daily orders for all three food delivery majors has jumped from 1.82 Mn to 3 Mn in January. However, since then the numbers have stagnated at 3.2 Mn and 3.4 Mn orders in October.
Responding to the report, a Swiggy spokesperson told Inc42, “Swiggy continues to see a strong month on month growth in our order volumes while our repeat rates remain not just the best in food delivery but across the board.”
The spokesperson added that in the last one year Swiggy has grown its operations from 40 cities to over 500 cities, restaurants have grown four times, delivery partners’ growth has doubled and transaction numbers have grown by 2.5x.
However, Zomato and UberEats did not respond to an Inc42 query.
The media report added that the food delivery market has become still after new users started adopting the service, leaving the existing players to compete among themselves for a larger market share. An ET source, who is said to be an investor with knowledge of food delivery business numbers, said, “If in one month, for instance, Swiggy does well, it is coming at the expense of taking that order away from others and not growing the market.”
They added that the cases where new customers place orders are majorly driven by company discounts. Nationwide protests against Zomato’s loyalty programme Zomato Gold is also said to have impacted the decline in market growth. The situation is expected to only worsen with Amazon planning to launch its food delivery service.
The mood across the board of food delivery companies has shifted towards reducing losses and increasing monetisation at any cost, according to the report which cited sources close to the matter.
“They (Zomato) are cutting discounts and marketing on the bottom end. They are cutting misuse and abuse, like people breaking an order into 2-3 to get more discounts and just by doing that they are able to cut (cash) burn,” Sanjeev Bikhchandani, cofounder of InfoEdge, reportedly said in a conference call with analysts.
Profitability Concerns In Foodtech
Although 2018 was termed as the year of foodtech startups, the profitability of these companies have still been a topic of concern with players depending heavily on cashback and discounts to acquire users. This coupled with growing discontent among restaurant partners and delivery executives have only added to the troubles of food delivery majors.
While Swiggy hasn’t announced its financial performance for FY19, Zomato’s financials do give us a hint of foodtech sector’s grim reality. On a consolidated basis, the total income of Zomato is INR 1397 Cr, with expenses of INR 3598 Cr leading to a loss of INR 1001.15 Cr for the year ending March 31, 2019. The consolidated financial report includes the performance of 41 subsidiaries of Zomato.
On a standalone basis, Zomato reported total revenue of INR 1350.47 Cr and expenses of INR 3109 Cr leading to losses of INR 570.52 Cr for the same period.
Meanwhile, UberEats has been on the lookout for a possible acquisition deal with multiple reports of its acquisition talks with Amazon’s food delivery arm. Earlier this February, UberEats was also reported to be in talks with Swiggy to divest its business by taking a 10% stake of India’s fastest foodtech unicorn. Prior to this, it was said to be in talks with Zomato, however, both the discussions have now reportedly failed.
