Taking inspiration from Blinkit’s success story, Zomato plans to launch going out business under a new name and app, District, to seize cross-selling opportunities
Per sectoral experts, the new app will not have to struggle for users, as Zomato has a wide base of loyal customers, who will happily embrace its new app
While the company may bloat its advertising expenses by around 8-10% for the next few quarters to promote the app, experts do not see any significant impact on its overall profitability
Two years ago, doubts of many shrouded Deepinder Goyal’s decision to acquire the struggling quick commerce startup Blinkit (Grofers earlier). Today, Zomato
has proven them wrong.
Well, for starters, while the gross order value (GOV) of its three B2C verticals — food delivery, quick commerce, and going out — grew 53% year-on-year (YoY) in the last quarter (Q1 FY25), Blinkit alone surged 130% YoY.
After dispelling many apprehensions surrounding Blinkit, Zomato has now set its eyes on a new vertical, going out.
Alongside announcing the results for Q1 FY25, Zomato said it will launch a new app, District, for its ‘going-out’ business. The app aims to allow customers to discover and book restaurants and book tickets for movies, sports events, and live performances, among others.
With this announcement, Goyal had said that the District (by Zomato) app could be a game changer, as it is a one-stop destination app for going out for each of the aforementioned use cases
“If we execute this well, we see going out becoming the third large B2C business emerging out of Zomato,” Goyal said.
Notably, Zomato has been trying to scale its going out vertical for some time. In June this year, Zomato initiated talks with Paytm to acquire the latter’s movies and event ticketing business.
Both the companies confirmed the development but said the talks could not be walked. As per reports, Zomato was planning to expand its Live reach by venturing into new cities and developing fresh intellectual properties (IPs).
With District, Zomato Wants To Seize Cross-Selling Opportunities
Taking inspiration from Blinkit’s success story, the foodtech giant plans to launch the going-out business as a new brand. During its earnings call earlier this month, the Zomato leadership mentioned that the company plans to leverage the traffic on its app for District, similar to how it developed Blinkit as a separate brand with its separate app. The move will also help the listed foodtech startup keep customer acquisition costs low.
According to sectoral experts, the move bodes well for the company, as it has already built a loyal customer base both on its food delivery service and grocery delivery app.
“Zomato already has a large audience of youth, millennials, and Gen Z consumers. With access to extensive customer data, Zomato can effectively cross-sell new services to its existing users in the food and quick commerce sectors, which are predominantly urban and metro-based,” Karan Taurani, SVP, Elara Capital, said.
According to Kush Ghodasara, an independent market expert, Zomato has demonstrated strong execution capabilities in the past by scaling up Blinkit, putting critics to shame.
“Now, Zomato is employing a similar strategy to attract customers to its other services,” he said.
Ghodasara added that Zomato knows the pulse of Indian consumers. Leveraging its loyalty programme, Zomato Gold, to help customers bag exclusive deals and save on delivery fees, the foodtech has been successful in breeding loyalists.
According to the analyst, customers have become more loyal to specific apps over the last few years due to convenience and the benefits of sticking with one service.
Per Ghodasara, the startup adopted the same strategy with Blinkit to retain and grow its customer base, and a similar approach will likely help Zomato transfer its existing customers to its new booking app.
Zomato District Is Just The Old Wine In A New Bottle
Imperative to mention, Zomato already operates a “going-out” vertical, which is currently focussed on two key areas — dining out and Zomato Live.
The dine-out segment covers discovering restaurants, making table reservations, and facilitating transactions for dining experiences across India and the UAE.
Zomato Live, on the other hand, includes the discovery and ticketing of events such as food festivals, music concerts, and other live events in India.
As per Zomato’s filing, its going-out segment clocked INR 258 Cr in revenue in FY24, witnessing 51% YoY growth from INR 171 Cr in FY23.
According to Taurani, the launch of the new app will also help Zomato make the most of the burgeoning online ticket market in the country, which is growing at an annual rate of 15-20%.
Currently, BookMyShow leads the online ticketing space, including cinema and live events. While Paytm, too, is in the market, Zomato’s customer base offers it an opportunity to make a dent in the space estimated to generate around INR 1,500 Cr in convenience fees.
Currently, the overall cinema market is estimated to be around INR 12,000 Cr and the live event market is approximately INR 10,000 Cr, according to Taurani.
According to an analyst at a brokerage firm, while Zomato’s live events business may be currently contributing a single-digit percentage to its overall revenue, the new move could boost this contribution to mid-double digits within the next three years.
Moreover, the analyst anticipates the food delivery business growth to become stagnant in the next few years. “Therefore, adding an alternative revenue stream is crucial for the company.”
Zomato District: A Worrying Proposition On The Cost Front?
Everything said and done, the new opportunity may pose quite a few challenges for Zomato. As per Elara Capital’s Taurani, the volatility of the events business could be a potential risk and profitability may fluctuate. For instance, BookMyShow faced challenges in scaling beyond INR 1,000 Cr in revenue.
Therefore, Zomato will need to manage customer acquisition costs and avoid heavy losses in the event arm. Zomato may also feel the need to increase its advertising expenses to promote the product, District.
While advertising expenses could rise by around 8-10% for the next few quarters, Ghodasara anticipates the increase in spending won’t have any significant impact on the company’s overall profitability.
“Given that Zomato and Blinkit currently have strong margins, they should be able to offset the increased advertising costs. As a result, while we can expect a temporary rise in expenses, the impact on profitability will likely be minimal,” he added.
Overall, analysts believe that Zomato’s track record with Blinkit, makes the industry hopeful that “District”, too, will emerge as a successful behemoth in the Zomato universe.
