As the food delivery industry experiences a decline in growth after the pandemic peak, Zomato is said to be preparing to launch a B2B logistics service to bolster its revenue streams. Sources suggest that the service will transport food, pharmaceuticals, and other consumer goods for other e-commerce players.
According to insiders, Zomato has begun reaching out to potential customers such as smaller food and grocery aggregators, online pharmacy firms, and consumer brands over the last 30-45 days. Additionally, the company’s trial service has already expanded to several thousand daily deliveries.
“We are in the initial stages of discussion with Zomato. If we choose to go through with the integration, there will be a lot of alignment needed to be done in the next 30-60 days,” said a senior executive of an e-commerce aggregator that works with more than 10,000 restaurants.
“Zomato is not really offering a much different price point for the service as compared to other players in the market. Logistics is a commodity… What Zomato can offer to us is a great product which comes with a trained fleet, better delivery timelines. It won’t move the needle much for us from a cost-centre perspective,” he added.
According to an informed source, Zomato is reportedly providing a service at a price range of INR 10 to INR 15 per kilometer.
The company has refrained from making any official statements regarding the matter.
As per an internet sector analyst from a brokerage firm, this new service has the potential to revive Zomato’s revenue growth in a profitable manner.
“It improves your fleet utilisation and also reduces friction points with sellers. As it is a B2B service, you don’t own the customer anyway. So, it is easier for you to take your full cut…. Swiggy is also doing Minis which is a form of this service only where they have partnered with D2C brands. This also helps you build scale moats against any new player trying to disrupt the hyperlocal industry,” he said.
“It is better than logistics players like Dunzo and Shadowfax taking the delivery leg revenues… That way at least you get back at least some part of the revenue loss,” he added.
Taking a cue from its American counterpart, Doordash, Zomato is now diving into the B2B logistics service. Doordash, a prominent food delivery giant based in the US, had already paved the way with its own service called ‘Drive’ back in late 2016.
“With Drive, and as we continue to expand into other industry verticals beyond food, we expect to compete with large internet companies with substantial resources, users, and brand power, such as Amazon and Google,” Doordash said in its 2021 annual report.
The company derives its revenue from the Drive service by charging per-order fees to merchants who utilize its local logistics platform for arranging delivery services to fulfill demand generated through their own channels. Revenue from Drive is recognized when the consumer gains control over the merchant’s products.
Zomato’s search for growth:
Despite experts suggesting a slowdown in the growth of the food delivery sector, primarily confined to metro cities, Zomato has been actively testing and introducing several new services throughout the past year.
Zomato experienced a significant expansion in gross order value, reaching INR 5,500 crore, representing an 85 percent growth between Q3 FY21 and Q3 FY22. However, the growth rate tapered off in the subsequent period, resulting in a 21 percent growth between Q3 FY22 and Q3 FY23.
In February, Zomato introduced a new service targeting students and office-goers, offering affordable home-style meals. These meals are priced as low as INR 89 per serving (excluding delivery costs) and are available for breakfast (8 am-11:30 am) and lunch (11:30 am-3:30 pm).
The infrastructure for Zomato’s new service, called ‘Everyday,’ was developed on the foundation of their 10-minute food delivery service, which was tested last year but later put on hold due to limited demand.
In the previous year, Zomato introduced a food delivery service called ‘Legends,’ allowing customers to order from renowned restaurants located in different cities. Initially piloted without any usage restrictions, it is now exclusively available to customers who subscribe to Zomato’s newly-launched Gold subscription program.
In January of this year, Zomato relaunched its ‘Gold’ loyalty program, emphasizing food delivery, at an introductory price of Rs 149 for a three-month period. This revamped program not only offers discounts for food delivery but also allows users to avail discounts when dining at restaurants.
