The famous food delivery apps Swiggy, Zomato, FoodPanda and UberEats have been spoiling us with their extravagantly delicious food offers. People of India are already too much foody and these food delivery companies have taken advantage of that. They offered us undeniable attractive discounts which forced us to forget our own kitchens and just sit back to relax and order food. However, one thing is for sure that the companies have not only offering food to make customers happy. The main agenda behind these heavy discounts is not only earning profits and customer base but to fight & cut-off the competition amongst each other.
However, soon the food delivery giants of the year, Zomato & Swiggy are expected to reduce their discounts by 40%. Also, UberEats & FoodPanda will be making a reduction in their discount giving policies by more than 40%. This is surely bad news for people who rely largely on the food delivery apps for a tasty supper.
As the reports suggest, on an average Zomato incurs a loss of around Rs. 25/- per order. It goes on to make around a loss of Rs. 260 Crores every month due to the heavy discount policy. Even though they are gaining more and more customers with their discount and trying to attract new ones, it is not feasible anymore for them to make it more entertaining for customers. Hence they have decided to reduce the discount rates. The company has to bear all kinds of charges including restaurant handling charges, delivery charges and other taxes as well.
Swiggy has also developed some backup plans to compensate for the reduced discounting policy. It is aiming to increase its restaurant base and tempting customers to order more and more food by serving its customers with various loyalty programmes like Swiggy Super, Swiggy Daily, Swiggy Pop and student campus app Swiggy Launchpad. As per their research, it has been estimated that Swiggy has increased its customers base with more than 50% since its inception.
Further, Swiggy soon will be running a pilot programme which goes by the name of “Swiggy Daily”. Through this, they aim to serve their customers with a home-style meal at budgeted rates. They aim to increase customer base and loyalty with this programme.
While Swiggy is planning to make it’s business more logistics oriented, Zomato is aiming to make it’s business plan much wider by trying to cover end to end food industry.
However, if we compare the customer base of the two food delivery giants, Zomato has a restaurant base of around 1.4 Million restaurants spread across 10,000 cities. Whereas Swiggy has tied up with around 90,000 restaurants across 160 Indian cities and operating it’s food logistics business through 1.8 Lakh delivery partners.
The year 2018 served Swiggy with a loss of around 398 Crores, even after generating a total revenue of Rs. 470 Crores. This was all a result of the extra expenditure borne by the company regarding food delivery charges, restaurant handling charges etc.
The bigger the business, the bigger are the profits and so are the losses. As compared to Swiggy’s loss of Rs. 380 Crores, Zomato ended up bagging a loss of $155 Mn in FY 2019, which is 3 times higher than its previous year loss of $38 Mn.
To make things more difficult for the food delivery companies, National Restaurant Association of India (NRAI) has asked the companies to constantly maintain a code of conduct in doing their business. This has compelled the companies to drop out unfair trade practices of fighting the competition and start making their service more reliant. They are aiming to increase customer satisfaction and targeting repetitive orders while expanding their restaurant base.
However, looking at the bigger picture, India’s food logistics market is estimated to grow by $2.5-$3.5 billion by the end of the year 2021. This will entertain the food delivery companies with a prime area to expand their business. We hope they are soon able to make things work in terms of profit and serve us with better discounts and offers again in future.
