Zomato Gold Members Surge to 38 Lakh; Driving Growth In Food Delivery Business

SUMMARY

Zomato Gold orders now contribute to around 40% or INR 3,192 Cr of the gross order value (GOV) of the food delivery vertical, Zomato said

However, Zomato also highlighted that Gold orders are less profitable than a non-Gold order due to the impact of program benefits

Overall, Zomato reported its second consecutive profitable quarter in Q2, posting a PAT of INR 36 Cr

Foodtech giant Zomato said that its customer loyalty programme Zomato Gold has amassed 38 Lakh members in three quarters since its launch in January this year.

In its shareholders’ letter, released along with its Q2 financial statements, Zomato also said that the Gold members are driving the growth in its food delivery business. The company said Zomato Gold orders now contribute to around 40% of the gross order value (GOV) of the food delivery vertical.

Zomato’s food delivery GOV stood at INR 7,980 Cr during the quarter ended September 2023, which translates to a GOV of INR 3,192 Cr for Gold members.

However, the company also highlighted that a Gold order is less profitable than a non-Gold order due to the impact of program benefits. Zomato said that the charges paid by the customer are almost negligible due to free delivery benefits.

The startup said that the cost for Zomato Gold programme is higher due to high delivery cost owing to longer average delivery and distance, company providing priority service to the members during peak hours, and costs on account of the no-delay guarantee. Subscription fees collected from the members covers only a small part of the incremental costs.

“All of this results in Gold orders being meaningfully worse-off on contribution margin vis-à-vis non-Gold orders. However, that gap is starting to (and should continue to) narrow, driven by efficiencies across both pricing and cost of the program,” the company stated.

Meanwhile, food delivery GOV grew 9% quarter-on-quarter (QoQ) and 20% year-on-year (YoY) during the quarter. The company said the demand for the service is recovering well after the slowdown of the last two quarters of FY23.

Contribution margin of food delivery improved to 6.6% during the quarter under review from 5.1% in Q3 FY23 (pre-Gold relaunch).

Talking about platform fees, Zomato said it is charging a fee of INR 2 to INR 5 on every food delivery order “to make our economics better and viable in the long run”.

Overall, Zomato reported its second consecutive profitable quarter in Q2, posting a PAT of INR 36 Cr. Its PAT stood at INR 2 Cr in Q1 FY24, which was its maiden profitable quarter.

Its quick commerce Blinkit also turned contribution positive for the first time during the quarter under review.