The online food delivery market – currently a duopoly of Swiggy and Zomato has grown to a large extent on account of the high burn rates that both these companies have. The market potential is huge however the unit economics for both these companies would be worrisome to investors.
However, under the hood, the food delivery businesses are more about unit economics than being “passionate about food”. While understanding food preferences, outing out, or dining in culture across various layers of India will underpin the strategy for any company in this space but the growth can be spurred by creating demand (user acquisition) and supply (delivery partner availability) at the hyper-local level.
Thus it really is a game that is played at the city level. Let us take Delhi NCR and Bengaluru as examples. Both the cities have roughly similar contributions to Tier 1 order volume (approx. 20%). But the market standing of Swiggy & Zomato are completely opposite. In Delhi, NCR Zomato has a lion's share of the market at nearly 56% in H1 2022 while in Bengaluru Swiggy comes out on top with 55% market share.
Another interesting fact is that in Delhi NCR – Swiggy provided a discount on 81% of orders and Zomato provided a discount on 77% of orders but Swigyy still has a lower share in Delhi NCR. Similarly in Bengaluru – Zomato provided a discount on 74% of orders and Swiggy provided a discount on 68% of orders but still, Zomato has a lower share in Bengaluru
Furthermore, Large Restaurant chains like Dominos, McDonald's, KFC, and Rebel food brands are trying to fulfill orders directly on their own. This is happening now because these brands are sufficiently well known and don't need to rely on Food Delivery apps for “discovery” in the user journey. And the exorbitant commissions (15% to 30%) that the food delivery apps charge also reduce their profitability. This is also taking the same pool of delivery partners away from Swiggy and Zomato.
Consumer behavior data is crucial to know and should get baked into the strategy for efficient execution. This can be done effectively by using Vumonic’s behavioral data for food delivery or eCommerce for many different categories.
Vumonic Datalabs is a global consumer intelligence platform. We provide high-quality, deterministically linked, large structured data that can be used to derive deep consumer, business, and market insights. Our proprietary data pipelines deliver unbiased actual transaction data collected in privacy and secure manner via large global panels.