CASE STUDY – ZOMATO

Zomato, formerly known as Foodie bay, was founded by two IIT graduates who observed the
long queues and waiting times at their colleagues' cafeteria. They recognized the opportunity
to save people's time by offering food delivery right to their doorstep. To address this
problem, they created an online platform where restaurant menus were digitized and made
available for easy browsing and ordering. This innovative approach revolutionized the food
industry, allowing customers to conveniently order their favorite meals with just a few clicks,
eliminating the need for physical queuing.

As Zomato gained traction, it expanded its services to become a leading food delivery and
restaurant discovery platform. By bringing menus online, Zomato not only provided a
convenient solution for individuals but also helped restaurant owners reach a larger customer
base. Restaurants could showcase their offerings and attract new customers beyond their
physical locations. Today, Zomato has transformed the way people order food, making it
more efficient and accessible, thanks to its founders' vision and determination to address the
common problem of long queues in cafeterias.

TIMELINE
In 2010, Zomato launched its first mobile app, enabling users to search for restaurants, access
menus, and read user reviews on their smartphones. The company expanded internationally,
starting with the United Arab Emirates and gradually entering other markets in the Middle
East, Southeast Asia, and Europe. In 2015, Zomato acquired Urbanspoon, a popular US-
based restaurant discovery platform, to establish a presence in the American market. The
following year, Zomato introduced its food delivery service, which allowed users to order
from restaurants and have meals delivered to their homes.

Zomato continued its expansion efforts, extending services to over 10,000 cities in 24
countries. The company diversified its revenue streams by launching products like Zomato
Gold, a subscription service offering discounts at partner restaurants, and Zomato Pro, a
subscription for restaurant professionals. Zomato's financial success has been noteworthy,
with revenues reaching INR 2,485 crore (approximately $340 million) in the fiscal year 2020.
As of 2021, Zomato boasts over 53 million monthly active users and holds a dominant 70%
share of the food delivery market in India. The company has made strategic acquisitions,
including UAE-based food delivery platform Talabat, to strengthen its international presence.
Zomato's expansion and innovative offerings, coupled with substantial funding, have
contributed to its valuation of over $5 billion and its position as one of the world's most
popular food delivery apps.

Please note that the financial figures and market share mentioned are based on available
information up to 2021 and may have changed since then.

Zomato Target Audience

Zomato’s target audience comprises people between 18 and 35 with smartphones and well-
versed in using different apps.

It focuses on attracting two customers, one who prefers to eat out and another who wants to
order food from outside and deliver it to their home. These groups frequently coincide.

The Zomato Gold program offers incentives for those who eat out and offers food delivery
service for those who want the food delivered at home.

Individuals who work and want their food delivered to their office, students who live in
hostels and need food, those who lack time to prepare their food, and those who occasionally
enjoy eating outside under this group.

Zomato’s Business Model

 Business model for the year 2021-22

Revenue Model
1. Restaurant Advertising:

Zomato offers restaurant advertising services to enhance their visibility on the platform.
Restaurants can feature at the top of search results, enticing customers to order from them.
Zomato charges approximately 40 to 50 Rs per click, providing an effective marketing
avenue for restaurant owners.

2. Food Delivery Commissions:

Food delivery constitutes a substantial portion of Zomato's revenue. With its own ecosystem
for online food ordering, Zomato requires restaurants to use their associate riders for
deliveries. Restaurants are charged commissions for each delivery, contributing significantly
to Zomato's earnings.

3. Subscription Programmes:
Zomato's Gold subscription is a major revenue stream. Subscribers gain access to premium
services and enjoy complimentary beverages and food at partner restaurants. In 2020, the
Gold subscription model generated around $49 million in revenue.

4. Live Events:

Zomato organizes live events to promote partner restaurants, providing them with increased
exposure and visibility. Restaurants pay a premium price to participate in these events.
Notably, the Zoomland event, featuring food and live musical performances, has gained
popularity.

5. Zomato's White Label Access:

Zomato offers a unique White Label platform, enabling restaurants to operate their businesses
online. This suite of technologies allows restaurants to have custom-branded native apps,
enhancing customer engagement. The subscription model for the White Label platform is
priced at $200 per month.

6. Zomato Kitchens:

Zomato embraces the concept of cloud kitchens by providing infrastructure services to

restaurant partners. Zomato invests Rs 35 Lakhs to establish a restaurant in the right location
and offers a return of 2 to 4 lakhs to the investors. Currently, Zomato operates 180 affiliate
kitchens and continues to seek passionate entrepreneurs for further expansion.

7. Zomato Hyperpure:

Under the Hyperpure program, Zomato collaborates directly with farmers to supply high-
quality raw ingredients to restaurants at competitive rates. This venture has experienced rapid
growth, with Zomato supplying raw ingredients to over 1,000 restaurants across multiple
cities. Zomato has invested in large-scale operations, such as warehousing, to meet increasing
demand.
8. Multiple Business Partnerships:

Zomato has formed strategic partnerships with various organizations. It has collaborated with
Uber Taxi to offer users seamless transportation to Zomato restaurants. Other significant
partnerships include London & Partners for enhancing online presence in European regions,
as well as collaborations with PayPal and Visa.

PROBLEM STATEMENT
An analysis:-

When you open the Zomato app, the prices of the particular product is a bit
higher than what it actually is. Suppose the customers make a visit, the
restaurant would have to incur costs on arrangements for a table, a waiter for
them to get the order, and a maid for cleaning. The restaurant owner
thought, what if the cost that they are incurring would be utilized to get extra
sales? That is how they tied up. Zomato will take the food from the restaurant
and deliver it for which they charge a commission of around 15 to 20% per
order.

Original price of X item at restaurant=120

Price of X item on Zomato=160

Tax and delivery charges=10

Total amount=170

Discount@40%=68

Amount payable=102

If the restaurant owner gives a 15% commission to Zomato on 120(INR) it

would be at 'No gain No loss'

Your Role -

Despite this Zomato still continues to make a loss which also means there
must be a flaw in their current business model. What would you as an
aspiring entrepreneur (a problem solver) do to help Zomato become
profitable and how would you help it in reducing its losses? Given below are
few hints and clues that you can use to come up with a standardized plan for
Zomato to pitch in the next round to its investors on how it will move to
becoming profitable again .

Clues and Hints –

1) Zomato has a lot of recurring expenses that outweigh its revenue

(Example: Advertisement)
2) It has a huge user base but that but it still is unable to make money as
the majority of them are there for the discount.
3) High competition (Swiggy) which is also a loss-making company but is
able to make more income than Zomato, why?
4) You can try making the business model more efficient
5) You can also use the financial data to understand what can be done
better
6) You can find out a way to use the huge user base
7) Zomato to stay alive still heavily relies on marketing