Zomato, the foodtech giant, reported that its customer loyalty program, Zomato Gold, has attracted 3.8 million members in just three quarters since its launch in January this year.
In its shareholder letter, which accompanied the Q2 financial reports, Zomato further stated that Gold members are playing a pivotal role in propelling the expansion of its food delivery operations. The company disclosed that Zomato Gold orders currently account for approximately 40% of the gross order value (GOV) within the food delivery sector.
During the quarter ending in September 2023, Zomato’s gross order value (GOV) for food delivery amounted to INR 7,980 crore, with Gold members contributing INR 3,192 crore to this total.
Nonetheless, the company emphasized that a Gold order tends to be less profitable than a non-Gold order, primarily because of the influence of program perks. Zomato pointed out that the fees paid by Gold members are nearly negligible, largely owing to the complimentary delivery benefits.
The startup explained that the expenses associated with the Zomato Gold program are elevated, primarily due to increased delivery costs stemming from longer average delivery distances, the provision of priority service to members during peak hours, and the expenses incurred to honor the no-delay guarantee. The subscription fees collected from members only partially offset these additional costs.
“All of this results in Gold orders being meaningfully worse-off on contribution margin vis-à-vis non-Gold orders. However, that gap is starting to (and should continue to) narrow, driven by efficiencies across both pricing and cost of the program,” the company stated.
In the same period, food delivery gross order value (GOV) saw a 9% quarter-on-quarter (QoQ) increase and a 20% year-on-year (YoY) growth. The company noted that demand for the service is rebounding effectively after the previous two quarters of FY23 experienced a slowdown.
The contribution margin for food delivery increased to 6.6% in the current quarter, up from 5.1% in Q3 FY23 (prior to the Gold relaunch).
Regarding platform fees, Zomato explained that it is implementing a fee ranging from INR 2 to INR 5 for each food delivery order with the aim of enhancing the sustainability and long-term viability of their economics.
Overall, in Q2, Zomato reported its second consecutive profitable quarter, demonstrating a PAT of INR 36 Cr. This followed its maiden profitable quarter in Q1 FY24, where its PAT stood at INR 2 Cr.
Read More: Zomato reports remarkable surge in profit, achieving second consecutive profitable quarter in FY24
Also Read: Zomato turns profitable in Q1 FY24, reports INR 2 Cr consolidated PAT
During the quarter being reviewed, Blinkit, the quick commerce platform, achieved a positive contribution for the first time.
