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Zomato’s Business Model: Business Case Study


Zomato, as one of the most well-known members of the Indian startup ecosystem across the country and, has expanded into a number of overseas markets over the years. Deepinder Goyal and Pankaj Chaddah established the Foodtech Unicorn while the former was working at Bain and Company and finding it difficult to discover the correct restaurant menus during lunchtimes. Goyal, ever-innovative, began photographing the menu and sharing it with his coworkers to make ordering easier. This not only allowed Goyal to order lunch, but it also allowed him to start a new business.


Chaddah joined Goyal's team to help him build Foodiebay in 2008, a website that allows users to browse restaurant menus and leave reviews. More than a decade later, the company has expanded its offerings to include online meal ordering, restaurant reservations, loyalty programs, restaurant enablement, consulting services, and much more.


Zomato has experienced numerous highs and lows over the years, but it has managed to keep up with rival Swiggy in the online food ordering industry. Zomato has remained in the public eye throughout its growth and funding, from raising funds from significant investors through the withdrawal of Chaddah.


So, what is Zomato's business model and how does it generate revenue? Simply said, Zomato has spread its resources around the company rather than putting all of its eggs in one basket. Apart from online ordering, which most customers are accustomed to, Zomato now has various revenue methods.


Breakdown of Zomato’s Business Model


  • Restaurants Listing/Advertising: Zomato was originally only a listing platform and a restaurant directory. Restaurants that joined the platform were able to earn advertising money as a result of this. Zomato is now charging restaurants commissions to be featured prominently on the feed, after the rollout of food delivery and restaurant bookings. Restaurants can pay to have their upcoming events or special offers promoted under their main banner, increasing visibility and conversions among Zomato users.

  • Food Delivery: To begin, Zomato charges restaurants a commission based on the number of orders placed through its food delivery service. Restaurants pay a commission for each delivery, which is subsequently split between the delivery partner and the corporation, while users pay a delivery fee. Restaurant commissions differ depending on whether Zomato completes the delivery or the restaurant utilizes its riders. Due to fierce competition and the requirement for steep discounts, this is claimed to generate only a small portion of the company's total revenue.

  • Subscription Programmes: Zomato opened up a consistent stream of revenue through Zomato Gold for consumers and users, as well as subscription alternatives for eateries. Restaurants pay a monthly charge to be part of Zomato's bouquet of deals, while users pay a subscription fee to enter the Zomato Gold loyalty program, which provides unique discounts. Restaurants also pay a monthly fee to Zomato for features such as live tracking, tamper-proof packaging with the Zomato brand, and other services.

  • Live Events: Last year, Zomato joined the branded live events market with Zomaland. In addition to dining, Zomato charges a fee to enter Zomaland, where customers may enjoy live musical performances and other activities. According to Zomato, it held an entertainment festival in Delhi, Pune, and Bengaluru in 2018 that drew over 100,000 people. Zomaland will visit Pune, Delhi, Bangalore, Hyderabad, Mumbai, Jaipur, Pune, Chandigarh, and Kolkata this year.

  • Zomato Kitchens: Zomato partners with entrepreneurs to build up and manage Zomato Kitchens under various labels to provide kitchen infrastructure services to select restaurant operators. With an investment of INR 35 lakh or more, entrepreneurs can fund eateries in the proper area. Zomato claims to be delivering a monthly income of INR 2 lakh to INR 4 lakh to investors with 180+ affiliate kitchens presently up and operating.


Conclusion

Zomato has worked to lessen its dependency on cash-burning models as it has grown in size and scope, and has simplified to enter enablement and other user-generated revenue sources. The majority of Zomato's cash loss comes from retaining users vs Swiggy. Zomato, on the other hand, may soon be able to profit from other aspects of its business strategy, despite being in the crosshairs for heavy discounting methods.


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