Digital Business Models

Group – 9

Case Study

The Magic Ingredients of Zomato

Presentation link
https://drive.google.com/file/d/1iK_NQQZyUEfnEJvUcyHf88LymCrVwQaB/view?usp=sharing

Group – 9

Akshay Kumar | EPGP-14A-011 | [email protected]

Debjani Bhattacharjee | EPGP-14A-037 | [email protected]
Kundhan Karunakar Adari | EPGP-14A-063 | [email protected]
Nishant Sinha | EPGP-14A-089 | [email protected]
Shrisha Raj | EPGP-14A-119 | [email protected]
Profile of Zomato

Zomato is a prominent platform for searching and discovering restaurants, placing online food orders, and
making restaurant table reservations. The company was founded in 2008. The company, which has Gurgaon
as its headquarters, is said to have been founded by Deepinder Goyal and Pankaj Chaddah. Zomato was a
pioneer in meal ordering and the search for eateries in India. All of it started when Deepinder Goyal and
Pankaj Chaddah, were in their New Delhi office and witnessed a large number of people waiting in line for a
very long time only to see the menu card. And at that particular moment, the two of them had an idea for a
solution, which led them to start "Foodiebay."

Foodiebay uploaded the soft copies of the menu cards on their website. When everyone in the office started
to use it, they were all able to save a lot of time. The number of visitors to their website increased as a result,
and Foodiebay swiftly opened it up to all local inhabitants. Due to the enormous user base and rapid growth
rates it drew, Foodiebay's creators decided to alter it and broaden it internationally. At that point, the business
changed its name to Zomato. Zomato officially changed its name from Foodiebay in 2010. To fulfil orders
from restaurants that lacked their delivery service, Zomato initially partnered with businesses like Delhivery
and Grab when it launched its food delivery service in India in 2015. Zomato has completed 10 rounds of
funding, bringing in a total of $443,8 million in investment capital. Ant Financial, Sequoia Capital, Temasek
Holdings, Info Edge, and Vy Capital are among the company's most prominent investors.

Acquisitions

Zomato has made several acquisitions over the years, with the most prominent being the purchase of
Urbanspoon, a company established in the United States, in 2015. Zomato has also purchased Obedovat, Menu
Mania, Lunchtime, MapleGraph, Sparse Labs, Gastronauci, NexTable, Cibando, Mekanist, and runnr.

Platform Business Model

Zomato is a restaurant search and discovery platform which enables both restaurants and customers to provide
high-quality culinary services as well as information concerning restaurants, their menus, and customer
feedback. Zomato's business model entails the provision of food delivery services, in addition to information,
user ratings, and menus for restaurants with which Zomato has partnered. Incorporating a variety of restaurants
and making it easier for customers to choose restaurants that meet their needs, Zomato has sparked a revolution
in businesses that are involved in the food business. To have a better comprehension of how its operations are
managed and how it generates income, the Zomato Business Model will now be broken down into its most
important components and elements.

Pricing Strategy
The eateries are prepared to pay to be listed since they value the vast number of Zomato users. Customers who
use the app, however, are fully subsidised. Additionally, payment gateways, applications, etc. advertise their
products by offering incentives. For the restaurant to pay Zomato a fee, it must observe a notable increase in
volumes originating from the platform as opposed to its websites or through advertising. The platform
intermediaries (in this case Zomato) would also try to make up for their user subsidies by interacting with a
third party on the platform. This third portion places high importance on communication between users and
restaurants rather than just the quantity of users or restaurants on Zomato. For instance, restaurant owners are
more inclined to advertise on Zomato if more people are ordering food from them.
Zomato could also use pricing as a strategy to reduce quality-evaluation costs for the quality-seeking side
(users) and therefore rake up a large number of users, that are valuable to the quality-providing side
(restaurants), reducing the users’ search costs.
Pricing Model
Zomato is a good example of an on-demand pricing model. Depending on how urgently they need something,
hungry customers are willing to pay more for each transaction if the platform can adjust supply to match
demand volatility (peak hours vs. lean hours). When there are fewer, less frequent, but crucial transactions on
the platform, on-demand pricing performs best. The platform incurs non-trivial variable costs for each
transaction and makes investments to get the supply side ready for the demand. Pricing for such services could
be determined by the number of transactions, the value of each transaction, or a combination of both. The
platform might ask the supply side to agree to make certain investments in the platform to conduct transactions
there. Due to the high switching costs for the consumers, this asset specificity will make it easier for the
platform to adjust to changes in demand.

Zomato makes money from the following four business lines:-

Food Delivery:

The food delivery segment is the bread and butter of Zomato as 85% of Zomato’s revenue comes from the
Food Delivery segment.

Let’s take a realistic example wherein we order one plate of Hakka Noodles from a popular restaurant listed
in Zomato – Mainland China for an amount of Rs 500. Upon payment, Mainland China prepares the food,
while our delivery boy Raju is assigned the task of delivering the order through Zomato.
The breakdown of the Bill is as follows:-
(a) Delivery Charges to delivery boy Raju/ Delivery Partner Rs 50
(b) Packaging Charges to Mainland China for packing materials Rs 50
(c) Food cost paid to Mainland China Rs 300
(d) 25% commission charged by Zomato to Mainland China Rs 100
TOTAL Rs 500
In addition to this, Mainland China shall also be paying a fee to Zomato to show up Mainland China listing in
the searches done by the customers in the Zomato app. This is a significant amount of Zomato’s revenue.

Hyperpure

Hyperpure (B2B) –

Through Hyperpure, Zomato acts as a middleman between farmers and the restaurant. Zomato sources
ingredients and supplies from farmers and sells them to restaurants. Restaurants that are ordering supplies
through Hyperpure get a Hyperpure tag on Zomato’s page which is intended to assure quality, which in turn
gives an assurance to the customers that the ingredients used by the restaurants are of superior quality. Zomato
started Hyperpure in 2019 and has been growing rapidly. In the month of December 2020, they were supplying
to over 6000 restaurants around 6 cities in India.

Dine Out advertising –

Customers utilise Zomato's dining-out services to find restaurants, book tables, read and leave reviews left by
other customers and pay for their meals. Zomato had 3,50,174 active restaurant listings as of December 31,
2020. On its platform, there were 157 million pieces of user-generated content. 12.2 million covers were
reserved at tables through its platform in fiscal 2020. Through the sale of advertisements, it makes money off
of the dining-out option. Zomato charges its restaurant partners for greater visibility on the network.

DISCOUN
TS!!!!!
Try Mainland
China!

Zomato Pro –

Customers at specific restaurant partners can access flat percentage savings through Zomato's premium
membership programme for both meal delivery and eating out. The percentage discount offered to Pro
Members at their restaurants is determined and funded by the Pro Restaurant Partners. Zomato had 1.4 million
Pro Members and more than 25,350 Pro Restaurant Partners in India as of December 31, 2020. However, this
program is discontinued in August 2022.
The direction of Network Effect

It's important that Zomato onboard ample restaurants which add value to the Menu of offerings, Zomato should
ensure not just the quantity of the restaurants but also the diverse menu options to be made available. This
ensures a positive effect for the customers when they navigate through the platform.

Network Effects

Network effect Impact

NOVELTY Users would choose a platform when they believe it would cater to all their
search and food preferences. If more restaurants are available to cater their
cuisines in the app that would increase the usage of the app.
CHOICE The platform will have to facilitate or aid in the decision-making of the users
who are navigating or using the platform. The greater the number of
restaurants that are willing to participate in that platform's delivery service,
the greater the number of users who are willing to join.
CONVENIENCE Convenience would increase the adoption rate of the users on the platform.
As users have several options/ touch points in the platform including
Searching, selecting a cuisine, ordering, booking/ reserving a table, and
customer service, it's important for the platform to be updated as per user
requirements. Technically being capable eases the custom experience.

Competitor Analysis – Swiggy

Swiggy, one of the most well-known startups for online meal delivery, was introduced in August 2014. Its
platform is one of the best options, especially when it comes to ordering and eating your cuisine at your
doorsteps, and has more than 5,000,000 downloads. This industry leader in meal delivery introduced "Swiggy
Go," which is now known as "Swiggy genie," in September 2019. Swiggy has worked with more than 25,000
restaurants throughout its history and has given delivery drivers tremendous opportunities to increase their
income by fulfilling customers' requests for their valuable delivery services.

Valuation and Investors of Swiggy

After receiving a recent $700 million investment from asset management Invesco, Swiggy is now valued at
$10.7 billion. Softbank, Alpha Wave Global, Qatar Investment Authority, Ark Impact, Prorus, Baron Capital
Group, Sumeru Venture, IIFL AMC Late Stake Tech Fund, Kotak, Axis Growth, Sixteenth Street Capital,
Ghisallo, Smile Group, and Segantii Capital are some of Swiggy's current investors.

Business Model

The Swiggy business concept is based on an on-demand, hyperlocal food delivery business model. It employs
contemporary methods and technology to meet the market's rising need for foodies.
It serves as a connection point for diners and establishments. It runs on a dual partnership approach that has
proven to be more advantageous for restaurants and retail establishments that want to perform their food
service through the platform.
Key Partners of Swiggy

Swiggy has teamed with Burger King and McDonald's to offer the greatest food ordering and delivery to the
platform's users, in addition to restaurants, retail stores, and delivery services. In addition, it has partnerships
with Google Local Guide, Sodexo, and Indifi Technologies to enable customers to post reviews and pay using
meal cards, as well as a financing programme for their affiliated eateries.

Main activities of Swiggy

Creating a technical stack that enables delivery companies to satiate consumers' appetites is one of the
platform's major operations. Swiggy's other main tasks include:
• Forging solid connections with eateries and retail establishments.
• Employ both full- and part-time delivery personnel.
• To provide customers with a great experience, and offer speedy and simple payment gateways.
• Manage and keep an eye on the delivery process to guarantee that foodies receive exceptional delivery
services.
• Create, oversee, and maintain tech infrastructure.
• Solve the issues of the partners and customers.
• Manage your customers to attract more of them.

Customer Segment of Swiggy

Swiggy's key consumer market is thought of as food enthusiasts who enjoy ordering their favourite meals
through a digital platform and want them delivered right to their door.
Those who desire to have their food delivered to their door after purchasing them at surrounding stores
(Swiggy Instamart).
People who want to get the pickup, buy and send anything (Swiggy Genie)
Merchants: Restaurants who want to become partners with Swiggy and those without a food delivery service.

The cost structure of Swiggy

• Payroll costs for both partners in delivery and own workers.
• Costs associated with creating and maintaining platforms and applications.
• Administrative, advertising and marketing costs

Revenue streams of Swiggy

• Delivery Charges
• Membership program Swiggy One
• Commissions from Merchants
• Advertising

Swiggy’s witty Digital Marketing Strategy

While TV, especially through IPL collaborations, has been growing in prominence for Swiggy, they have
perhaps been one of the first digitally driven brands in the Indian landscape. Let’s now understand how the
Brand leverages digital effectively.
Search Engine Optimization: Swiggy has 50 Million+ App downloads and sees and monthly organic traffic
of 4.9 Million users. While most of the traffic to Swiggy’s website is Branded traffic led by “Swiggy” as a
search word, the website also sees 37% un-branded traffic on the back of other keywords that the Brand owns.

As per Semrush, The key driver behind Swiggy’s organic traffic is its big webpage with 285k pages and
hence has a ranking for 633k keywords on google. Swiggy also has ~30% keywords in the top 10 positions
in google, ensuring that traffic moves to Swiggy seamlessly. Along with the organic traffic that the Swiggy
website delivers to the Brand, Swiggy also invests in paid search through the 136 Paid keywords that it owns
at a spend of INR 54 Lac per month.

Zomato’s response - Zomato has put in a lot of effort in Search Engine Optimization as well. As per Uber
suggest data, it ranks in India for 816,952 keywords as on July 2019. It’s organic traffic is 6,719,882 users
per month. Zomato gets backlinks from 12,274,172 unique domains. It also gets 233 backlinks from high
authority domains like .gov and .edu domains. All this increases the Domain Authority of Zomato’s domain
and helps it rank higher.

Social Media Marketing – Swiggy has 154k subscribers on Youtube, 0.9 Million Likes on Facebook & 239K
followers on Instagram as of June’21. Along with images of delicious dishes to entice its users to order more,
Swiggy social feed is full of humor and witty campaigns. Swiggy has built an emotional but filled connection
with its target audience which is millenials.

Zomato’s response – Zomato engages with the audience by posting on trendy topics. The brand understands
the audience’s nature. Hence, it promotes content which makes users share it, comment on it and view it again
and again. It utilises trendy topics and posts simple images in order to interact with viewers online. Zomato
particularly grabbed a lot of eyeballs during its noteworthy posts during the 2016 Olympics.

Email Marketing - Email has always played a major role in growing Swiggy’s business and reaching out to a
significant part of the consumer base. Swiggy’s Email campaign is predominantly aimed to build a sense of
curiosity amongst its users.
Zomato’s response - Zomato’s Digital Marketing Strategy will have to keep changing according to the
current trends. They will have to find new ways to attract their consumers’ attention. Right now, they are
doing a great job. If they continue working hard on it, they are going to reap a lot of benefits for it.

Swiggy’s Innovations to its traditional business model

Instamart: As India entered a lockdown in 2020, both Swiggy & Zomato experimented with grocery delivery
through Swiggy Stores & Zomato Market. However, both brands quickly realized that the commissions in
grocery delivery weren’t as attractive as food delivery and hence were not a viable solution to leveraging their
efficient but expensive delivery fleet. While Zomato Market was wrapped up in 2 months, Swiggy has replaced
the online grocery marketplace with ‘Instamart’.

The key differentiator versus Big Basket & Grofers was the delivery time of 30-45 minutes, day and night
serviceability (7 am till 12 midnight) a wide assortment across categories such as instant meals, snacks, ice
creams, beverages, fruits, and vegetables. Instamart addressed the unmet grocery needs of the time-pressed,
convenience-seeking urban consumer.

Swiggy Genie - Is another service being experimented with by Swiggy that makes effective use of their
delivery personal and over the past year has been extended to 65 cities.

This service is very relevant in the times of the pandemic, however, it remains to be seen if the brand will
continue to focus on the same post-pandemic.
Zomato’s response - Zomato is again trying its hand at – grocery and goods delivery, something that it has
failed twice at. It remains to be seen if the successful acquisition of Blinkit, formerly known as Grofers, makes
any difference in Zomato’s fate.

A bulk of Swiggy’s grocery customers are its existing food customers. Being on the same app offers much-
needed ease of use, and the loyalty programme benefits are seamless too – along with the advantages of
merging food and grocery delivery orders. Moreover, Swiggy can gain pure grocery customers too and target
them for their food offerings, thereby hurting Zomato’s core food business.

Consequently, Zomato has to build its grocery capabilities quickly and in our view has to merge the apps
effectively to leverage its customer base for grocery. Running it separately is unlikely to create much value as
customer acquisition costs will be high for Blinkit, with inferior customer stickiness.

To build a successful business, Zomato has to cross-sell to its existing customer base, integrate the tech stack
and also add infrastructure to ensure delivery — a cost and execution abilities that its food business never
needed.

Recommendations for the existing business model:

Although Zomato is probably happy to be where it is in the market today, there is still a lot of scope to thrive
in the competitive environment of food delivery. With players like Amazon and Google eyeing this lucrative
sector, Zomato needs to be on its toes to stay ahead of the curve. Some of the recommendations to the existing
business model are as follows:

Increase scalability through Cloud Kitchens

Zomato can make use of Cloud Kitchens to enhance the scalability of the platform and cater for a wider range
of customers.

Multi Brand Cloud Business -

Owner-operated aggregator with multiple restaurant brands, shared co-working kitchens that are rented, and
no storefront.

The most complex cloud kitchens are based on data intelligence, such as the demographics of the population
of an area, popular cuisines, and the demand and supply of goods and services at a hyperlocal level. Biriyani,
North-Indian, Chinese, Burgers, Pizza & Pasta – that's truly it in India) in a neighborhood (a 5-6 km radius)
with relatively fewer restaurant options that serve these dishes in order to meet the demand for the most
commonly requested cuisines in India. This business approach is ingenious because it presents the many
brands as if they were their very own independent organizations.
In addition, having a single kitchen that everyone uses helps keep the operational costs down. This model is
quite similar to the first version of the cloud kitchen business, which did not have a real storefront. One way
to think of it is as a chain of restaurants, each of which focuses on a certain type of cuisine but is owned by
the same mother brand and uses the same kitchen.

Digital Transformation

Being one of the pioneers in digitalisation, Zomato is probably one of the most proactive companies going
around in India. From ditching Zomato Pro when it was inviting nothing but trouble to posting catchy one-
liners as part of its advertising, Zomato usually takes a step or two in the right direction before others. A few
ways in which it can further up its game are as follows:-

Validation without OTPs to Minimize Order Time

Zomato can enter into strategic partnerships with banks to enhance the customer experience for placing orders
by 1 click validation without OTP.

Visa, the world's most prominent payments technology company, has introduced Visa Safe Click (VSC),
India's first1 frictionless payment solution for online business transactions. VSC was developed specifically
for the Indian market and would offer customers of online retailers a safe and hassle-free method of making
payments. VSC will eliminate the requirement for One Time Passwords (OTP) for transactions below Rs.
2000 using its built-in network authentication capabilities. This would greatly help improve payment success
rates for e-commerce merchants in India.

Zomato can forge partnerships with Visa & other payment gateways to imbibe this seamless transaction
process which would help minimize the avg ordering time and also improve the success rates of the
transactions.

This can specifically address these one-of-a-kind obstacles that are exclusive to the Indian e-commerce
business, and it assists in removing these sources of friction. Consumers are free to concentrate on their
ordering while brands see an increase in the percentage of successful payments they receive as a result of this
innovation, which makes the payment process more streamlined and efficient.

AI-based food recommendations:

Using machine learning, algorithms can help users discover food based on their mood and weather. It can also
send customized notes as per the user’s past preferences.

Integrate with Alexa/ Google Voice Asst/ Siri for Ordering Food and Booking Tables Through Voice Asst:
Zomato can enter into strategic partnerships with Alexa, Google and Siri to help users place orders for
Groceries (BlinkIt), order food via Zomato via Voice and book tables at their favorite restaurants.

Bill splitting:

Zomato can provide for all its users to perform instant bill splits so that the users can pay their share from their
app digitally.

Expansion Ideas -

Venturing into Catering

In 2018, Zomato acquired TongueStun Food, a Bengaluru-based start-up which aggregates caterers and
restaurants for office canteens through cuisines from different hotels. It can up its game further by establishing
itself as a recognised catering partner for marriages and other smaller and larger events.
Railway Catering and Airline Catering

Travelers do not have a choice of ordering food when traveling by rail or air. Zomato can make a world of
difference by partnering with IRCTC or with the airlines to deliver the food of choice of the traveller. To date,
RailMitra provides food in trains online using e-catering services in Indian Railways. It has partnered with the
IRCTC-authorized e-catering partner,

RailRestro for providing food delivery services in trains. If Zomato is able to enter into a deal with IRCTC or
is able to forge a partnership with RailMitra/ RailRestro, then it can have greater access to what otherwise
seems to be a lucrative market.

Tie-up with street food vendors

There is a lot of untapped potential in the street food market which is unrecognized but liked by locals.
Adding such hyperlocal street food order options will allow Zomato to get more users resulting in additional
revenue.

Introducing loyalty program

Zomato can introduce various Tiers (eg: Silver, Gold, Platinum, etc.) for their customers’ categorization.
These Tiers could be only earned and not bought based on the number of orders. Based on a customer’s tier,
they can be provided with various cashbacks, preferred delivery options and special treatment from restaurants
and delivery partners.

References

https://www.elluminatiinc.com/swiggy-businesss-model/
https://bstrategyhub.com/swiggy-business-model-how-does-swiggy-make-money/
https://startuptalky.com/zomato-success-story/
https://www.zomato.com/investor-relations/financials
https://www.vrdnation.com/how-does-zomato-make-money/
https://www.elluminatiinc.com/how-zomato-works-business-model-revenue-insights/
https://www.mbaskool.com/marketing-mix/services/17445-zomato.html