Zomato and It’s Perils - Part 2

Takeaway(s)

Welcome to our Eighth issue of Focus series at the duologue. The reading time to finish this one is around 7 mins.  

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The Duologue is a concerted effort by Vivek and Bheem to make sense with a unique lens. Now, on to the post!


We will start this issue with quoting something that I wrote back in day when we were all asked to stay indoors. Lockdown was a shining moment for the food delivery aggregators to help the sector and extend an olive branch, instead [1]: 

Now due to stoppage of Food delivery, most of the delivery guys were out of orders. So both companies tried to turn their delivery workforce into urban butlers and grocery delivery personnel by training them through their app. So, Genie (urban butler service), grocery and meat products were launched in quick succession.
With a pandemic and lockdown being enforced, these companies acted fast to adopt to the needs of safety and hygiene and lined riders for the other deliveries. All of a sudden they became the only lifeline we had to access things we require from the safe regions of our home. 
While branching out, they also made a point very clear to every restaurant partner, you are in this on your own. Don’t expect to rely on us when you need us the most( delivery stoppage). Wasn’t there an app that shows you the menu of the store from which you could order online, pay and then instead of getting it delivered, go collect it yourself. 
In the brief 3 weeks when delivery was stopped, these apps could have done the rest and asked the customer to go collect the food once prepared. Why didn’t they do this for those restaurants that were still functioning during those few weeks on their own? 

I am writing again on this topic because what could have been an easy rollout of a feature is finally coming to Zomato. Let's get the announcements out before we talk about it.[2]

Zomato is launching a takeaway option and rolling it to the wider public with 55,000 restaurants onboard. This will provide the customers the option to order through the application and collect their food from the restaurant.

I am still waiting to read reports that highlights which type of restaurants are getting more orders on these platforms in these times. If you find anything along these lines, please send it my way. 

So, the question we are looking to answer is what changed for Zomato to launch this takeout feature now to the wider gambit of restaurants and customers. We have some answers from zomato’s announcement. [3

One common solution that checked all the right boxes was the option for customers to pick up their own orders. 
This addresses multiple issues:

  1. There are still millions of customers who haven’t yet ordered since the beginning of the lockdown. We believe a lot of them who are bored with home-cooked food will start consuming restaurant food with a safe and convenient takeaway option 

  2. For restaurants that already serve delivery orders, takeaway provides another avenue to access more customers, and further grow their business. 

They took a good 6 months to come to terms with a logical extension of feature that the restaurants would have appreciated much earlier. Now, when they are launching it, they are doing so on the pretext of giving it for free. 

It serves us no purpose to question the intent without knowing what was going on. It’s not that they were not busy. They had funding scare due to China India standoff.[4]

Zomato: Coherence or Irrelevance

The current Zomato app offers 5 options with regards to eating and ordering food. When I am viewing a restaurant's page. I get to witness this: 

  1. You could order from their restaurant 

  2. You can dine in the restaurant without any contact. 

  3. You can get their Pro membership to avail some discount. 

  4. You can reserve a table to dine in the restaurant 

  5. Lastly, you can pick up your order from the restaurant. 

One of the earlier posts on duologue was about Zomato perils where I tried to cover what led to impasse between Zomato and its restaurants back in 2019 with Zomato gold.[5]

All in all, right now Zomato doesn’t exactly know where it sits. All its flagship offerings are in conflict with each other. All of this was led by its own misgivings, lack of foresight and growth pressure due to VC funding. The only thing clear is all of these are hurting restaurants by first devaluing their menu, second commoditising experience ( people look for Zomato gold, if it is there , they are not particular about the dining ) and lastly, taking a significant cut from their earnings on both fronts.

I believe that most of this holds true even now. The issues have only scaled up with a different naming, gold is now pro. It was kept busy with the pandemic impact [6]:

Zomato has been witnessing a lot of action in the past three-four months. The company is gearing up for IPO by the first half of next year and has raised over $400 million since August. Zomato’s IPO dream is going to face hurdles as it has not been able to recover from huge losses. According to Zomato’s unaudited financial data, it had a revenue of $394 million in FY20 whereas its EBITDA losses stood at $293 million in FY20.

On top of this, its COO quit the role to run their new and upcoming nutrition arm. This brings us back to act of getting to the drawing board, which i presume Zomato couldn't do since I last wrote about them. Like I mentioned before, it has been busy with multiple things. [7

The takeout feature makes more sense for Zomato than any other food ordering company. It could have been of great service had it been released earlier. Even now when it is releasing it, it lacks conviction. [8

Infact, takeaway on our app has witnessed tremendous growth with the order volume increasing by more than 200% in the last few months.

Therefore, for restaurants to be able to tap into this demand immediately, we are making our takeaway service available for free to our restaurant partners.  We will not be charging any commission, and will also forego the payment gateway charges we incur on all takeaway orders. 

By giving it away for free. It sends the wrong signal to both the restaurant partner and your own staff working on the feature.

To understand why Zomato continues to struggle with its feature rollouts, we need to address the translation it never made.

Discovery to Delivery

Zomato is currently stuck in an internal impasse. It is one of transition from discovery to delivery that it never could complete. One, because its culture and positioning was anti-thesis to this and second, it had strong competition in the delivery side.

Jobs to be done for a customer in eating food can be broken down into two categories at large. Discovery and delivery.

  • Discovery of places, restaurants and dishes. 

  • Delivery on the other hand is catering to delivery of dishes from restaurants. 

Zomato was a pioneer in discovery of food. It had the restaurants, user generate content(reviews), community of influencers and curation(lists). All of these enabled the customer to discover food in and around their vicinity. It helped people discover newer places and share their experiences with others.

When was the last time you discovered a new place through Zomato? 

Since it's entry into food delivery, Zomato has been struggling. Whereas its counterpart in the same space began delivery of food with a different point of view all together. [9]

Born from the ashes of a failed logistics startup, Swiggy achieved the elusive “product-market” fit very early on. Today it operates across 520 cities, where over 250,000 delivery partners ferry along over 45M orders each month. Orders that are fetched from over 160,000 restaurants that it has partnered with.
Majety’s and Reddy’s vision for their second startup to become an “ultra-efficient urban logistics platform” would not be realised. At least, not immediately. Instead, they set about to “change the way India eats.”

I quote from the article to state what delivery is for Swiggy. It is their main service, food is only the means. They want to extend their pie by extending their delivery services for other things. Like groceries, Swiggy launched this in the pandemic recently. [10]

Swiggy is working on making the delivery quicker and faster. Bundling more orders in a single ride. They are focused on re-mapping the way India eats for now but slowly expanding to re-map how India orders groceries as well. 

Zomato’s DNA and scale is more aligned with food being its core. It was more about you making the choice where and what to eat. This is why takeout feels more aligned to be a part of Zomato. But giving it away for free shows lack of interest behind it. Swiggy will never launch a takeout, its delivery first business. 

Here is a 2X2 matrix to drive home the point where Zomato needs to focus rather than where it is focusing. 

Both Swiggy and Zomato are food aggregators but they are primed to solve complementing problems to the customer. Where Zomato is primed for discovery of everything food, Swiggy is more focused towards delivery of food. 

While Swiggy is extending its reach by becoming delivery of other things like groceries. Zomato is still stuck figuring out what it wants to be rather than doubling down on the discovery. With the boom of D2C brands in the grocery space, Zomato could be their channel of discovery. A place where brands could work with their customers and gather feedback. There are many B2B delivery companies to whom you can outsource the delivery part of it. 

Swiggy It but Zomato what?

I will leave you with a positional sentiment i believe captures the crux of the issue. 

For Swiggy it is simple, “SWIGGYIT” food and soon, groceries too. Yet, throughout writing this post, I stumbled to come with up a positioning statement for Zomato. This to me is an impasse they have to free from fast.  

Regards

Vivek


References

Each series of focus comes with its sets of references:

[1] : Pandemic Lesson - Duologue

[2] ; [3]: Zomato’s Blog announcing the rationale behind Takeout feature

[4] : Medianama’s coverage Zomato’s Ant problems.

[5] : Zomato and its perils -Duologue

[6] : Entrackr’s coverage of the recent developments in Zomato.
[7] : Entrackr’s coverage of the recent developments in Zomato.

[8]: Zomato’s Blog announcing the Takeaway launch.

[9] : Swiggy CEO’s interview with Ken

[10] : Details about the Swiggy Stores and Swiggy Go.


The Duologue is an effort by Vivek and Bheem to have a dialogue about varying topics. 

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