THE DUOPOLY IN THE INDIAN FOOD DELIVERY ECOSYSTEM - Palak Gupta

Not many years ago, people used to hoard delivery menus in their drawers and call up restaurants for ordering food, only to wait for 60-90 minutes before their food would get delivered. 

Surprisingly, it was only 5-6 years ago. Ordering food online is now so convenient and affordable that a lot of people in India are doing it almost every day. Delivery boys wearing different uniforms are now seen in every corner of the city, rushing to complete their deliveries. And although both Swiggy and Zomato are associated with food delivery, it is interesting to explore how different their business plans and strategies are.

Both these companies have consistently been loss-making. While Swiggy made losses amounting to 2300 crores, Zomato posted losses of approximately 1000 crores in FY21. However, both of them have similar revenue numbers. But perhaps, what would be interesting to see is how they see their respective futures.

Let’s start with the analysis of Zomato. It’s trying to be a one-for-all application for customers. Whether it's for ordering in, going out for a meal, or simply contemplating what restaurants are currently trending in the city, Zomato has an answer. It's currently the only app in India that serves as a repository of restaurants, full of ratings, costs, menus, and pictures. It’s not just about delivery, Zomato has a page for every restaurant where users can add reviews, pictures, etc. even if that restaurant does not deliver via Zomato. They also have a food-related stream to keep their users engaged. Moreover, verticals like Hyperpure are testimony to the fact that Zomato isn’t just a delivery aggregator. Acquisition of Fitso shows Zomato’s commitment to ‘everything food’.  

Swiggy, on the other hand, is focused on the delivery ecosystem and is entering into new categories and verticals inside the same. They’ve started delivering alcohol, groceries, medicines, etc. They are utilizing their delivery fleet to their advantage. They can be compared to the likes of Uber Connect and Dunzo in this regard. Also, given the fact that Swiggy also has the delivery fleet at its disposal, it is looking to explore the B2B segment, i.e., to make deliveries from one business to another. This area is still relatively nascent.

In addition to this, we have also seen the failure of other food delivery businesses like Foodpanda and Uber Eats. Uber Eats was unable to keep up with the competition due to barriers like economies of scale. To achieve this, huge capital investment was required and Uber Eats had no more capacity to bleed more money and was ultimately bought by Zomato for $350 million. Their business model also contributed to the failure of the company. Uber Eats outsourced the management of the restaurant accounts to third parties. The majority of enterprises in India are still run on the basis of personal relationships. Uber Eats was unable to empower and onboard restaurant partners in order to provide a unique service. Restaurants have also been compelled to shift their business to other platforms due to high commissions and little visibility.

Conclusively, Swiggy is focussing more on the delivery model and looking beyond food whereas Zomato is focusing on food and looking beyond delivery. Both these companies are heavy competitors when it comes to food delivery, however, a few years down the line, both these companies might develop into conglomerates with food delivery being just one line of business. Also, with the entry of Amazon in the food delivery segment, it would be interesting to see how the market share mapping pans out for these two companies and how successful they turn out to be in their growth and diversification plans.