Craving for your favourite cuisine and looking to get the food delivered at your doorstep too? One of the best options that come to our mind is “Zomato”. By browsing the website or online app of food search engine Zomato, we can easily place our food order by exploring various restaurants and their menu. Moreover, it also offers attractive deals and discounts to make our overall food experience more satisfying. Zomato is a well-known name in India in offering services of restaurant-cafe search and online food delivery. Currently, this online platform serves in more than 10,000 cities and 24 countries across the world including Canada, Australia, USA, New Zealand, and India. Using this foodie platform, we can conveniently review restaurants and feedbacks on their food quality. It is meant for both restaurant owners and food lovers. Using insightful analytics of Zomato, restaurants can route their business to rapid growth. Users are also able to access menu and images of those restaurants that do not possess their own website as Zomato extends its facility to restaurant owners to list their menu, to increase their business and promote any special menu through listing advertisements, etc. without having an online presence. The search engine of Zomato is designed so well that it displays only relevant restaurants according to the keyword in search criteria. It connects more and more people to food and also facilitates restaurants in enabling a viable ecosystem.
A Brief Background of Zomato
Two IIT Delhi graduate Deepinder Goyal and Pankaj Chaddah laid the foundation of Zomato in July 2008 which was initially launched as “Foodiebay”. While working with Brain & Company in Delhi, they observed a lot of people kept on waiting for a long duration just to have a menu card to order food. While watching the constant demand of menu leaflets from colleagues and of different restaurants, Deepinder came upon with an idea of digitalization of paper menu in a single digital app which is more convenient to use and easily accessible without waiting for a longer time. This idea emerged as Foodiebay in which the website was uploaded with soft copies of menu cards of different restaurants. Sooner their office colleagues started using the same which conserved a lot of their time as it became easier for them to choose a restaurant and order food using a single app platform. This gradually brought more traffic to the website and subsequently, it was expanded for everyone.
From Foodiebay to Zomato
During the initial phase, Foodiebay was started in Delhi and later on it started operating in other major cities of India such as Kolkata and Mumbai. The popularity of the brand became huge as it received an enormous response from customers. This encouraged its founders to enlarge the services of Foodiebay in international locations. To make the brand more captivating among its customers, Foodiebay was transformed in “Zomato”. This new name was easy to remember and also it abolished name confusion with the eBay website. Founders officially relabeled Foodiebay as Zomato in the year 2010. Headquarter of Zomato is in Gurugram. As per the statistics of last year (2019), the total number of employees of Zomato is recorded more than 5000 and monthly active users are listed as 70 million.
The Business Model of Zomato
The vigorous business model of Zomato played a crucial role in its growth and success. Before discussing the Business Model of Zomato, let us first have a look at what exactly the term Business Model is and what are its basic elements. A Business Model in an organization is considered a structure that is based on concepts that support the feasibility of a product or organization and demonstrates how an organization works, generates income, and how it moves forward to achieve its objectives. So, a Business Model comprises all the processes and policies that an organization adopts and pursues. Peter Druker, the management guru has defined a Business Model as a model that is expected to explain your customer, a value that you can add-on or create for your customers and strategies you can adopt to do that at reasonable prices.
Zomato’s Business Model is aimed at providing quality food services, information related to restaurants, their menus and user reviews. The Business Model of Zomato consists of providing food delivery services, information, user reviews and menus of partner restaurants. It has created a revolution in industries doing food business by including different restaurants and facilitating people to look for restaurants more conveniently. The key components or elements of the Zomato Business Model are disentangled below to understand the management of its operations and revenue generation. Let us discuss each element of the Business model from Zomato’s outlook.
1. The Value Proposition of Zomato
The business model of business is aimed at creating unique value for its customers. The business model of Zomato is focused on inventing new and add-on services that customers cannot receive anywhere else. It offers a lot of value to its customers like:
- The brand offers a one-stop-shop for foodies and facilitates restaurants to be different.
- The technology efficiency of Zomato has supported the brand by reducing food delivery time. Using the app, customers are able to receive their ordered food next to their door in lesser time.
- Offers dual services i.e., searching for restaurants and rating system, online services for food delivery.
- Various beneficial services are offered to customers while ordering food using the Zomato app like the price of food is based upon rating and differs according to the rating.
- Zomato’s value proposition also reflects in its review system using which diners can review various restaurants in their area. Apart from this, it facilitates restaurant owners to create a difference in their market place, even if these owners have ownership of more restaurants too.
- The pricing model of Zomato for food delivery-oriented services is quite comprehensive that carries useful information about the order to be delivered such as total cost, duration, etc.
- Zomato’s loyalty and membership service are beneficial for restaurant owners to make a loyal customer base. Like its membership program “Zomato Gold” and loyalty program “Piggybank” give advantage to customers by providing add-on value for their money.
- For restaurant owners, Zomato provides various valuable services like event management, targeted advertising, online presence management, performance tracker, customer service, improved visibility.
2. Customer Segments
Being a service provider company, the major source of revenue is consumers. Both consumers and restaurants are the main customers of Zomato. There are 3 types of customer segments of Zomato.
People who look for various restaurants for different cuisines according to their budget, locality, and preferred taste can find different restaurants in their areas and also a menu of different restaurants. Zomato also has those customers in their kitty who want home delivery for their food in a quick time. For this, Zomato has provided app facilities to them.
2.2) Local Business
Zomato’s platform is also beneficial for local restaurants that are looking for promotional tools or mediums to target a large pool of audiences. Different restaurants align with Zomato to enhance their visibility.
2.3) Database Companies and Market-Research Organizations
Zomato has huge customer data, which is collected through customers that review the restaurants and give ratings to them. So the brand’s database of customers is beneficial for database companies and market-research companies which require extensive customer data. So, these are also Zomato’s customers.
Reviewers, also termed as content contributors are those people who give ratings and provide their comments related to food quality and other services offered by the restaurants. These active reviewers also display photos of local restaurants using the Zomato platform.
3. Key Partners
Zomato has tied-up with different brands like Uber Taxi, London & Partners. It has partnered with e-payment organizations like Visa, PayPal. Furthermore, it has also expanded its digital food ordering landscape in India by announcing a tie-up with Paytm. This partnership deal has enabled its services of ordering and delivering food on the mobile app of Paytm. Due to these additional services, customers are able to search their desired restaurants which are listed on the online platform of Zomato and the Paytm App. This facilitates customers to order their food quickly. These partnership deeds have also contributed to the enhancement of Zomato’s business model. London & Partners have aided Zomato in lots of ways, out of which few are mentioned as under:
- Location finding for office set-up
- Providing assistance in the recruitment of staff and management recruitment process
- Facilitating in market research and work placements
- Advising on different policies and procedures, legal matters and accounts handling, etc.
Zomato has made an announcement of acquiring “Uber Eats India” recently i.e., on 21st Jan’2020 and hereafter, it has become the undisputed market leader in the category of food delivery in India. By this deal, the users and delivery partners of Uber Eats India now become users and delivery partners of Zomato.
4. Key Resources
Any business requires an adequate number of resources to operate its business activities. The key resource of Zomato includes its large amount of databases of different restaurants in different cities. A huge amount of database which is gathered from various restaurants is the base of the rating system of these restaurants. Different delivery personnel and Zomato’s presence in different countries are also key resources. These resources have played an important role in Zomato’s success over the years.
5. Key Activities
The key activities of Zomato can be presented in two main segments.
5.1) Rating and Listing for Restaurants
One of the major segments of Zomato is to provide search facilities for local restaurants and hotels. Customers can look for the same through the Zomato app or their website. Apart from this, Zomato facilitates its customers by providing information related to the menu, food quality, and contact details of restaurants. The rating system of Zomato is considered as one of the best systems that one can look in the market and based on the huge database collection by Zomato.
5.2) Online Food Delivery
Initially, Zomato launched as a restaurant search service platform but later on, it diversified its business in online food delivery as well. This key function of Zomato is based on a dual partnership. Zomato came into partnership with restaurants and delivery service people to deliver online food.
With the rapid increase of mobile users, different businesses including Zomato are focusing more on mobile apps so that the accessibility of their services can be increased in customers and also processes can be improved. The mobile app of Zomato is a key channel that is compatible with both android and ios platforms. Customers can use Zomato’s website to order their favourite food and also they can look for ratings of different restaurants listed in Zomato.
7. Customer Relationship
The ratings given by the customers who visit the listed restaurants on Zomato’s site plays a crucial role in its growth. Being a service industry, it depends on its customers for references and re-purchase as loyal customers. Zomato has a system of mandatory rating from customers through online customer support as a part of its customer service. The availability of support chat system is 24/7 for customers. Also, a customer service centre is available for customers to have any inquiries from representatives of Zomato for their problems.
8. Revenue Generation
Zomato had recorded USD 205 million revenue last year i.e., from Apr-Sep’19 as compared to USD 63 million in the same period in 2018. This is a huge hike in its revenue. Let’s understand how Zomato is making revenue by looking at each factor contributing in its revenue generation.
Advertising is considered as the major contributor to Zomato’s revenue. Different restaurants use Zomato’s site as a promotional tool and by doing so they are able to enhance visibility and pass on the information related to their offerings to a large pool of audience.
Zomato’s Advertising Strategy
Zomato allows access to different restaurants to customers and also, people can rate the service quality of these restaurants. Most of the time, these ratings are beneficial and reliable. Different restaurants can advertise their services by displaying pictures and banners on Zomato. Zomato takes a certain amount for these services.
Another source of revenue is a subscription fee. For providing analytical tools to restaurants, Zomato charges a monthly fee. The analytical tool, Zomato order is served to restaurants. Using this tool, the restaurant can get information on the interest of its customer pertaining to food. Also, restaurants can manage their offerings to customers as per their preferences and can highlight their food discount offers. One more tool, “Zomato Book” is specifically designed for restaurants. Most of the consumers prefer to book their food table in advance in a restaurant. This tool facilitates restaurants to know the vacant table and manage staff.
8.3) Ticket Sales by Organizing Events
In collaboration and partnering with various restaurants, Zomato organizes different events and festivals based on food items. The audience that attends these events is required to buy tickets at a certain price. Zomato receives a commission on ticket prices. The events of Zomato are the right platform for food organizers to advertise and promote their food products. The advertisement fee is paid by these food organizers to Zomato to advertise in these events.
8.4) Food Delivery Services
Zomato also makes money by providing online food delivery as the brand charges a certain commission from food organizers for these services. Last year i.e., in 2019, Zomato earned a commission of 75% of its total revenue from food delivery transactions only. As compared to 2018, Zomato’s food delivery services achieved a 4 times hike in growth in 2019 and generated revenue of $155 million as compared to $38 million in 2018.
8.5) Zomato White Label
App development also contributes to the revenue generation of Zomato. It introduced the “Zomato White label” service to provide offers to food organizers so that they can develop a customized food delivery app.
8.6) Dining Out
In recent years, Zomato has introduced various new services in its dine-out segment. This business segment includes reviews, listing, membership services, and also Zomato Gold; generated revenue of $49 million in 2019 as compared to $30 million in 2018. Other dining out services like Food@work, Online table booking, and Zomaland (a food carnival event) also contribute a decent share in the revenue of Zomato.
Zomato Gold is a premium service launched by Zomato in Apr’18 to provide membership-based premium services. Customers having gold membership are eligible for complimentary food and drinks while ordering from restaurants that are partnered with Zomato. This is a paid service to customers.
8.7) Zomato Consultancy
One of the competencies of Zomato is its large amount of database of restaurants, customers and its analytical tool. The brand is aware of food preferences of specific areas, their ordering pattern or behaviour through its database. So, startups who are looking to enter in those market areas seek consultancy services of Zomato for database and Zomato charges a fixed price for the same. The consultancy services include customer data related to the preference of customers, their desires and needs, etc.
8.8) Sustainable Business Segment
Zomato has launched an initiative “Hyperpure” in its Sustainability business segment in which emphasis is given on quality improvement of ingredients that are being used by restaurants by offering clean and fresh ingredients to its partner restaurants. In the first half (H1) of FY2020 i.e., Apr-Sep’19, Zomato has successfully served 2200 restaurants in Delhi and Bengaluru and disbursed 65000+ orders of these ingredients. Average 5-7 orders are placed on a monthly basis and it cost average USD 100 for an order. The revenue from Hyperpure is $6.5 million for H1 FY2020.
9) Competitor Review
Among 10 competitors, the top 3 competitors of Zomato are Swiggy, Just Eat, and InnerChef. Rest competitors include 48 East, Foodpanda, TinMen, Faasos, BOX8, Foodora, and Chefie. Among all these main 10 competitors, Zomato secured 2nd position in terms of revenue generation last year.
The functioning of the food and restaurant industry has changed as Zomato brought an idea of providing universal visibility of different restaurants. The availability of Zomato is based on the client’s budget, cuisine choice, and location. It makes the food ordering process effective and smooth by providing online delivery of food services. Zomato also extended its support in enhancing the business models of different cafes, restaurants, etc. through providing consultancy services and an opportunity to advertise and promote their products and services using Zomato’s feature of sharing videos and pictures on its app. Moreover, it helps partnered restaurants and cafes in their revenue generation by organizing different events and festivals. The well-organized Zomato’s business model focuses on its various elements that are considered as its revenue sources. Zomato has organized all its revenue generation strategies like event organization and advertisement, restaurant advertisement, sales of tickets in events, other specific services like Zomato Gold, etc. in such a way that all these contribute significantly to its revenue generation. It gives equal weightage to all its sources that resulted in a five times increase in revenue in FY 2020 as compared to FY 2019. Zomato’s tie-ups with different companies like PayPal, Paytm, Uber Eats, etc. are steps towards its revenue enhancement. These can be seen as beneficial alliances for the company.