Zomato appears to be losing ground in the food delivery space, as its competitors have moved more quickly to scale up their ultra-fast delivery services. According to a research note by ICICI Securities, rivals have gained momentum in the growing 10-15 minute delivery niche, leaving the Gurugram-based company trailing.
Zomato has recently launched a 15-minute food delivery service on its main app and introduced a standalone 10-minute food delivery app, Bistro, under its quick commerce subsidiary Blinkit. However, these efforts face stiff competition from Swiggy’s Bolt and Snacc, Zepto Cafe, and emerging players like Accel-backed Swish.
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While Zomato reported strong growth in its quick commerce arm during the October-December quarter, its core food delivery business experienced a noticeable slowdown. Gross order value (GOV) for food delivery grew 17% year-on-year during the quarter, down from 21% growth in the July-September period. ICICI Securities pointed out that the company may have ceded some market share as competitors expanded their ultra-fast delivery services more aggressively.
Though the research note didn’t specify Zomato’s exact market share for the quarter, earlier earnings reports indicated that the company held a 57% share of food delivery GOV in the July-September period, compared to Swiggy’s 43%. However, Zomato’s user base saw a dip, with monthly transacting customers slipping to 20.3 million from 20.5 million in the previous quarter.
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Zomato’s management acknowledged the slowdown but attributed it to weaker demand. The company maintained its long-term goal of achieving 20% annual growth in food delivery. The report by ICICI Securities, however, suggested that the rapid scaling of 10-15 minute delivery services by competitors likely contributed to Zomato’s weaker performance.
The impact of these challenges was reflected in the stock market, where Zomato shares dropped nearly 11% on Tuesday, closing at Rs. 214.65. The decline came after the company reported a sharp drop in net profit, partly due to increased spending and quicker-than-expected expansion in Blinkit.
Despite these setbacks, Zomato sought to downplay the effect of ultra-fast deliveries on its main food delivery business. In an analyst call, CFO Akshant Goyal said the 10-15 minute delivery segment is still in its infancy and hasn’t had a significant impact on Zomato’s operations.
Meanwhile, competitors like Swiggy are making strides. The company’s 15-minute Bolt service now accounts for over 5% of its total food delivery order volumes, with Bolt operating in more than 400 cities as of December.
Zomato CEO Deepinder Goyal remained optimistic about the potential of ultra-fast delivery to drive future demand. In a letter to shareholders, he pointed out that shorter delivery times have historically boosted demand for restaurant food. Goyal expressed confidence that scaling 10-15 minute deliveries would yield similar results over time, contributing to the platform’s long-term growth.
