Zomato, Swiggy’s Wall: Has Food Delivery In India Hit A Dead End?

Does Zomato want to zoom into the trail of big tech name-changers? 

Perhaps so. But, whether Deepinder Goyal’s Eternal will be the game-changer for the flagship food delivery brand is a $30 Bn question that only time can answer. 

If anything this rebranding of the startup signifies, it is the chief executive’s ambition to build a big business empire that would shroud how a slowdown in India’s INR 5.5 Lakh Cr food delivery sector is fast eating into Zomato’s bottomline.

Eternal will spread the cover on the troubled core of the business, while also bringing in subsidiaries like Blinkit, the quick commerce venture, and going-out app District under it.

Mark Zuckerberg thought much in the same line when he brought in Meta that covered embattled social media giant Facebook and his investment in Metaverse, although Larry Page adopted Alphabet to separate Google search engine from his other ventures, and Steve Jobs dropped Computers from Apple only to indicate his interest in a wider gamut of products. But it was perhaps Elon Musk’s simple affinity for the letter X that had unseated Twitter.  

What played behind the rechristening of the Brand Zomato within two months of featuring in the big league of top 30 public companies? There could be apprehension of a broad-based slowdown in the sector triggered by sluggish consumption that hasn’t spared its arch-rival Swiggy, too. 

A sustained deceleration in food delivery through the last two quarters drove Zomato’s profit down 57% on-year to INR 59 Cr, while its gross order value (GOV), which grew 17% over last year to INR  9,690 crore, recorded a meagre 2.3% rise sequentially. For Swiggy, the losses widened to INR 799 Cr in Q3 of this fiscal from INR 574 Cr a year earlier. Its stock price skidded below the issue price on February 6 after the company announced its quarterly results. 

An image makeover seemed to be the only way for Goyal and his team in the face of this changing market dynamics.

The broader management commentary from Swiggy and Zomato, which together command more than 90% share in the food delivery sector in India, was that there “was a broad-based consumption slowdown in urban India” that led to the tapered demand. The Union Budget for FY26 offered some optimism for the sector. A higher threshold for taxable income at INR 12 Lakh per year fuelled hope of a boost to discretionary spending and a consequent revival in demand. 

Userbase, Order Value Degrowth Spoils The Broth

What leaves a bitter taste in the mouth for the food delivery giants is an incremental growth in their gross order value (GOV) and monthly transacting users (MTU). The last two quarters have indicated that the platforms struggled with marginal rise in the two most vital metrics for the segment even in a conventional peak season. 

Sequentially in FY25, Zomato’s GOV increased only 2.3% to INR 9,913 Cr in Q3 and by 4% to INR 9.690 Cr in Q2. Its MTU, in fact, declined from 20.7 Mn in Q2 to 20.5 Mn in Q3, while in Q1, it stood at 20.3 Mn.

For Swiggy in FY25, the GOV grew by 3.4% to INR 7,436 Cr in Q3 and by 5% in Q2 to INR 7,191 Cr. Its average MTU grew marginally from 14 Mn in Q1 to 14.7 Mn in Q2 to 14.9 Mn in Q3.

Sateesh Meena of Datum Intelligence pointed out that new user onboarding and order frequency from the existing users – that translate into higher GOV and MTU – has stagnated over the past couple of quarters. 

“Besides the macroeconomic headwinds, the food delivery sector has been facing a saturation for quite some time now, especially in the existing markets which cover India’s top 8-10 metro cities. The December quarter was expected to see some turnaround in spending because of festivities, but that was not the case with online food delivery. MTU declining or increasing marginally is also a worrying sign, reflecting that the order frequency is not increasing. It mandates that both Zomato and Swiggy will have to revisit their playbook to attract new users,” Meena said. 

Flavour Fallacy In Newer Markets  

A look at the consumption pattern across the country shows that rural markets have outpaced their counterparts in cities when the Economic Survey 2025 and the Union Budget 2025-26 computed the consumption growth. Food delivery startups couldn’t reap from this shift because these are majorly dependent on the urban markets. 

Zomato has been dragging its feet on expansion since it rolled back operations from more than 200 cities in 2023. Swiggy, on the other hand, turned bullish on the Tier 2 and 3 towns and even introduced its 10-minute food delivery service across 400 cities. The revenue lever, however, failed to jack up the topline and margins for the company significantly. 

According to the food services players, the remote markets have their own set of challenges in terms of infrastructure and logistics. “These are very specific and different from one place to another,” said a Bengaluru-based quick service restaurant (QSR) chain owner. The consumer behaviour in smaller cities of India is very distinct from large metros. Lack of sufficient manpower, coupled with higher commission for smaller restaurants, in these cities act as crippling factors for online food delivery expansion, he argued. 

In major cities, the delivery platforms set up cloud kitchens in high-demand areas, which saves on logistics and infrastructure, but in smaller cities, the demand is usually scattered. “Accordingly, the go-to-market strategy for such cities would be entirely different from what Zomato and Swiggy have been doing so far.” 

This is what perhaps keeps the food delivery giants quiet on returns from non-metro cities, although they had earlier claimed that these markets had the potential to bring in 50% of their order volumes.   

Simmering Prices And Lukewarm Demand

Food delivery services saw one of the steepest price rises when Zomato and Swiggy reworked their unit economics and hiked their platform fees last year. With most of the capital deployed in expansion and execution of their quick commerce businesses, the food delivery business got pricier and fetched better margins.

The platform fees component has increased as much as 400% since last year. Zomato had earlier told the BSE the platform fee hike was a regular exercise. “Such changes in our platform fee are a routine business matter and are done from time to time and may vary from city to city,” it had said in a filing last October.

The platforms also introduced surge fees for peak hours, besides raising commissions from restaurant partners. “There is a ripple effect of hiked commissions charged from platforms. With commissions as much as 30-40%, the restaurants are at a huge disadvantage and have resorted to raising the prices on their menus applicable to the delivery platforms. This makes the dine-in more affordable and makes the food prices vary considerably between online and offline,” Bengaluru QSR chain owner told Inc42. 

Any GST hike on the restaurant food sale or delivery is being passed on to the customer which also makes food delivery costlier. 

Market analysts said food delivery services have turned 20-30% costlier between 2023 and 2024. This might have dented the demand in cities, especially among GenZ and millennial consumers.

A general trend of lower discretionary spends, fostered by macroeconomic uncertainties, have also taken a toll on food delivery demand, slowing down consumption from the middle-income groups, the analysts said. 

The duopoly of Swiggy and Zomato in the sector came under threat with the rolling out of the government-backed Open Network For Digital Commerce (ONDC). It tried attempting cheaper food delivery services through buyer platforms like Magicpin and Ola, but these platforms need to heavily incentivise the consumers and charge lesser commissions from the restaurant partners to grab a sizeable market share. 

Some sources said that Ola and Magicpin have created some dent in cities like Delhi NCR and Bengaluru but they would need heavy capital to take on the giants. 

New Revenue Levers In Quick Bites

As quick commerce paced up in most markets, the food delivery players too jumped on the bandwagon, with Swiggy and Zomato rolling out their 10-minute delivery formats for consumers on the go in metros and in Tier 1 and 2 cities. Swiggy said in its third quarter report that its 10-minute food delivery service Bolt made up 9% of the volume and the company has since begun extending the service to remote towns. 

On the speed track, as Bolt faced tough fights from both Zomato-backed Bistro and a more seasoned Zepto Cafe, Swiggy launched Snacc as a separate app earlier this year for delivery of prepared meals, beverages, and fast food within 15 minutes. 

All the players in the 10-minute food delivery space have claimed that they do not charge additional delivery fees or surge fees from consumers. But the model requires the platforms to build in-house cloud kitchen facilities, partnerships with third-party vendors, and better logistics.

“Data has shown us time and again that bringing down delivery time creates incremental demand for restaurant food. For example, when we started managing last-mile delivery for restaurants (compared to restaurants delivering orders themselves earlier), we were able to bring down the delivery time from 45+ minutes to around 30 minutes, which led to meaningful expansion in demand,” CEO Goyal wrote to Zomato shareholders. 

“We believe something similar can happen with 10-15-minute deliveries. This is also the reason why we experimented with Zomato Instant, but we could not find the right economic model and hence shut it down. Our learning here was that 10-minute deliveries would be possible only if we ensure kitchen networks are dense (and thereby cut down travel time), while also bringing down kitchen preparation time. Doing this consistently and profitably is not an easy problem to solve,” Goyal said.

Swiggy said in its management commentary that with Snacc, it is testing a different use-case for consumers linked to low-involvement consumption, where variety is not central to consumption. “We believe both the models are playing in the 10-minute food delivery segment, but catering to different need states and consumption occasions. We therefore intend to play in both the paradigms, and hope to outpace category growth,” it said in its letter to shareholders.

It is, however, remains to be seen if these new ventures will help the food delivery biggies attract more users and increase the order frequency.

“It should not be the case of the existing users trying out 10-minute deliveries which typically will have lesser AOV (average order value) at the expense of larger orders. That is not going to help their cause either,” alerted Meena of Datum Intelligence. “The only revenue moot is to either attract new consumers or increase the frequency.”

Alternate Cuisine For Change Of Taste 

For now, for both Swiggy and Zomato, the demand slowdown in online food delivery is being compensated with rise in revenue from dining-in and going out businesses. Zomato’s going out business, which includes events and dine-ins, the GOV has increased by 35% on-quarter and 191% on-year to INR 2,495 Cr in Q3 of FY25, whereas for Swiggy, the going-out business GOV grew 11% sequentially and 47% annually to INR 821 Cr in the same quarter. 

A surge in going out experiences and timely foray into these verticals will effectively act as buffers for Swiggy and Zomato from the slowdown in online food delivery, but eventually the aggregators will need a sustainable strategy to get their core business back on track.

[Edited By Kumar Chatterjee]