Zomato is set to venture into the catering business, utilizing its extensive network of restaurant partners. According to a senior executive at the food delivery platform, this move is part of a broader strategy aimed at servicing large orders.
In an interview, Rakesh Ranjan, Chief Executive for food delivery, mentioned that the company is considering the addition of more offerings to its loyalty program, Gold, despite concerns about potential impacts on profitability.
“If I want to have a gathering of 20 people at home…right now food delivery does not lend itself well into that kind of a use case. It’s winter, I want to have a party, or I want to do a small picnic in the local park. There are tons of such use cases in the offline world. But the food delivery does not lend itself into it very well. It’s only about tying some of those loose threads…so that’s what we’re going to be focusing on,” he said.
In June, Zomato launched the multi-cart feature, enabling users to place orders from several restaurants simultaneously.
Continue Exploring: Zomato aims to boost food orders; allows users to order food from multiple restaurants at same time
This aligns with the overarching strategy of the Gurugram-based company to expand the range of use cases for food delivery, aiming to increase its overall addressable market. Ranjan mentioned that Zomato is actively working on creating “occasions” for customers to order more through operational adjustments and strategic marketing campaigns.
“That’s one clear vector that we are going to be working on. We believe that occasional orderers, low frequency orderers, if they’re able to associate more occasions with Zomato and food delivery, then that’s a large base that we can address,” he said.
Ranjan emphasized that the focal point of Zomato’s upcoming initiatives would be the creation of meaningful occasions.
Earlier this year, the company introduced ‘Zomato Everyday’ with the aim of catering to cost-conscious customers at the bottom of the pyramid.
In the July-September quarter, Zomato disclosed a gross order value (GOV) of INR 7,980 crore for food delivery, marking a 20% year-on-year increase. Nearly 40% of this total was attributed to Zomato Gold.
Ranjan mentioned that the company intends to incorporate additional non-food offerings into the program.
“We understand that similar programmes are also available with our competitors and hence we want to make sure that our programme stands out not just on pricing, but also on experience. So, we will be investing time, energy and technology on improving the experience of our Gold customers,” he said.
“We’re also trying to see if we can offer Gold customers something outside food as well…we recently did a collaboration with Adidas, for example, where Gold customers had special privileges on Adidas…so we’re also trying to figure out if there are manifestations beyond food, which makes our customers feel more privileged but a lot of the work will happen just in terms of making sure that Gold customer experience of buying food on our platform is as impeccable as it can get,” Ranjan added.
Nevertheless, he clarified that the expansion of Gold will not encompass Zomato’s quick-commerce platform, Blinkit, which is owned by the company.
Significantly, Swiggy, Zomato’s primary competitor, administers a loyalty program named Swiggy One, which encompasses both food delivery and quick commerce.
Additionally, although Zomato is experiencing order growth driven by its high-frequency Gold customers, the associated offerings are negatively affecting the profit margins of food delivery orders. While the specific variance in margins between Gold subscribers’ orders and those of regular customers was not disclosed by the company, it highlighted during its September-quarter earnings that Gold orders exhibited a “meaningfully worse-off” contribution margin compared to non-Gold orders.
“We recognise the fact that margins get diluted…but Gold also powers a lot of growth,” Ranjan said. “What we are now prioritising at least for the next couple of months is that we don’t want to bug ourselves a lot with margin dilution. We think that Gold is still a good growth lever for the entire ecosystem. And we want to continue powering Gold and continue to get the volume and the GOV growth that comes with it.”
Meanwhile, Zomato is downsizing certain earlier initiatives that have not met expectations.
A notable example is Zomato Legends, a feature through which the company initially introduced intercity food delivery. On one hand, the company has ceased the program in specific cities where the intercity delivery service was provided. On the other hand, it has modified the product to offer a 60-minute delivery service focused on delivering pre-stocked food items.
“We are constantly trying to evaluate many opportunities and have almost nil sunk cost bias. If something doesn’t work, we don’t need to stick to it for very long,” Ranjan said.
“Legends was done in a particular way. It was loved by our customers, but it wasn’t helping us scale. In fact, for a good set of customers, it wasn’t helping solve their hunger pangs, because the food was getting delivered the next day. So, it had to be reengineered a little bit,” he added.
