Delivery of Online Food Order

1. Abstract

Zomato, an online restaurant discovery platform where customers can find restaurants in a

particular area, their menu, place order and pay online. Delivery part is taken care by the

restaurants. Moreover, customers can give their review about the restaurants and the quality

of food which help the restaurants and other customers to have a better experience. Internet

and mobile app are the only channel used for the whole process for customers to find a

suitable restaurant with better discount deals and place an order.

First restaurants review than placing order now Zomato wants to start delivering the ordered

food to customer’s doorstep by their own, which was earlier taken care by the restaurants

only. In an interview with Times of India, Deepinder Goyal, founder and CEO of Zomato

said “We are working on it and we may do it via an acquisition or partnership. Also, we

might end up doing it on our own". Zomato, entering lastmile delivery could turn out to be a

positive move as India is already a profitable market for the seven-year-old company valued

at over $1 bn. Once finalized, the service would be extended to other countries in a phased

manner.

2. Zomato Overview

Zomato was started by Deepinder Goyal with his friend and colleague from consulting firm

Bain & Co, Pankaj Chaddah, in 2008, with a mission “to ensure nobody has a bad meal ever

again” by

Helping people discover great places around them

Building amazing experiences around dining.

Enabling restaurants to create amazing experiences.

Zomato was based on the simple idea of providing scanned menus to customers, along with

contact numbers of restaurants, to enable them to order food over the phone. In a span of

seven years, it has emerged as the country’s largest online and mobile restaurant discovery

service, with over one million restaurant listings across 500 cities in 22 nations, clocking

more than 80 million monthly visits on an average. So far a restaurant-search entity, Zomato

enters the online food-ordering space in April, 2015. As a late entrant, it has decided on a

commission much lower than the segment average. It is asking for 7% of each order size,

compared to 15-20% charged by rivals such as Foodpanda and TinyOwl. Zomato also has a

clause that works on exclusivity in its tie-ups. If an outlet chooses to take orders from its

rivals, instead of going exclusive with it, its commission might go up, though it will still be

lower than the sector average. Given the extensive listing of restaurants Zomato already has,

12,000 partners in 14 cities appears to be a modest number. TinyOwl, less than a year old,

has a little over 4,000 restaurants, though serving only Mumbai. While Foodpanda services

160 cities with 5,700 restaurant partners. (Fig.2.1)

Over the last year, the start-up has been working aggressively on its international ambitions

and has acquired seven firms so far, including Urbanspoon for $52 million, one of the largest

purchases of a US-based consumer internet company by an Indian start-up. Zomato was the

country’s third-fastest growing technology company, according to Deloitte Technology Fast

50 India 2014 winner’s ranking, and registered a combined three-year (2012-14) revenue

growth of 1,399 percent. To date, Zomato has raised over $113 million with a valuation of

more than $660 million, over multiple rounds of funding from Info Edge, Vy Capital and

Sequoia Capital. It is currently in talks to raise $100 million (Rs 625 crore) in fresh funding.

Fig.2.1: Number of restaurants partnered with Zomato and others for online ordering

3. Strategies at Zomato

3.1. Cost Leadership

Zomato charges restaurants 7% of each order size, compared to 15-20% charged by rivals

because of it, restaurants are able to keep their prices low and provide the customers quality

food, giving customers an experience of value for money and a reason to come back.

12000

5700

4000

14 160 10

2000

4000

6000

8000

10000

12000

14000

Zomato FoodPanda Tinyowl

Restaurants Cities

3.2. Capital Investment

Zomato received an initial investment of Rs.4.7 crore from Info-Edge India in August, 2010.

Due to high growth rate of the company, they witnessed an increase in capital fund

investment by Info-Edge. Info-Edge subsequently invested Rs. 13.5 crore in September, 2011

followed by a $2.5million and $10million investment in year 2012 and 2013 respectively. By

the end of this period, Info Edge almost had 57% share in the company. With its plan of

expansion to different countries and other cities of India, Zomato was blessed by a whopping

$37million investment from Sequoia Capital and Info Edge in November, 2013.

3.3. Business Model

Zomato follows a simple business model. While starting afresh in the new city, some number

of pepole is assigned in each city to collect data about the restaurants and clubs around the

city. There is a centralized team based out of NCR which processes and cross-checks the data

to confirm the validity. The data is then processed to be put up on the website. There is a

separate team for advertising, which sells the website to the restaurant owners and attracts

them to advertise with Zomato. 95% of the revenues are earned from advertisements from the

local restaurants, while the rest can be attributed to event ticketing and restaurant booking.

3.4. Marketing Strategy

Zomato started with direct marketing techniques like SMS and Direct mailers. Through direct

SMS, Zomato targeted six lakh unique customers as a first stage. Irrespective of users’

responses Zomato blasted them with 6 SMS per day for one month. Zomato believes it

increased their reach with this technique. Next is direct email, where they effectively reached

corporates in bulk and hence reached the professional employees which are their primary

target. The mailers were designed in such a way that they are difficult to classify as spam

mails until and unless user opens the mail. And few users liked reading them during breaks

during office hours. Also using direct emails, they were sending Monthly newsletters to the

subscribers. Because of the nature of the email, but the average time user spent on this email

was only 0.2 seconds. They distributed pamphlets in specific areas. The pamphlets were very

specific to their business. They were attractive, colourful and of good quality to customers.

Right now Zomato promotes itself as Food Network. On Social Media, they follow simple

strategies of always be there for your customer and only best content needs to be sent to

customers. They treat Facebook and Twitter as two different platforms. Twitter is more used

for interaction and conversations and Facebook is primarily used to push their content and to

reach more people.

Once a user logs into Zomato with the help of Facebook or Google account, his/her friends

will be automatically identified on the site and they can easily follow their friends. As the

friends’ ratings are more trusted by users when compared to Zomato’s, influencing factor is

much higher with the help of social media.

4. Online Food Delivery

The next food order that you place from your favourite restaurant online might be delivered

to your doorstep by Zomato itself. The Gurgaon-based company is planning to foray into last-

mile delivery business. The company is in the process of finalizing its strategy for the same

and is considering multiple op ions for introducing last-mile delivery options to its users in

the coming months.

"We are working on it and we may do it via an acquisition or partnership. Also, we might end

up doing it on our own," Deepinder Goyal, founder and CEO of Zomato, told TOI.

Goyal-led company is known for being a leading restaurant review platform in the country

and it recently entered into online food-ordering business as the review space is getting

crowded with multiple players, who have managed to arrange handsome funding from

investors.

Zomato has bought strategic minority stakes in hyperlocal delivery companies in Gurgaon-

based Pickingo and Mumbai-based Grab in order to enable last-mile delivery for restaurants

that don't otherwise deliver. Zomato has also partnered with Gurgaon-based logistics start up

Delivery for last-mile delivery, which will be launched in five cities to start with. Rahul Gill

Co-Founder of Pickingo share his ideas that these investments will help them build the

company for building technology operations and will also allow them to scale rapidly with

Zomato's online ordering business. Zomato is making strides to move from being a search

and discovery portal to a platform offering technology that helps merchants connect more

effectively with customers with the launch of online ordering, cashless payments, soon to be

launched table reservations, and a point of sale system.

4.1. How Will They Do It

Zomato has now officially announced the opening of online food delivery on their mobile

app; which means that customers can now save more time. Zomato has now expanded into a

domain which very few mobile apps have dared to venture. As of now, the service would be

available only in New Delhi—NCR region, but soon it would be rolled out across Mumbai,

Bangalore and other cities. iPads will be deployed at the restaurants for online food delivery.

(Fig.4.1)

Fig.4.1. Screen Shot of Deepinder Goyal’s Tweet

Zomato would not track or verify the online orders for food; rather these iPads would be the

direct link between Zomato and restaurant owners for tracking and fulfilling the online

orders.

Zomato’s focus always had been to provide the best option to the end customer, and keeping

that in mind, they have introduced an amazing twist into the whole online delivery funnel:

higher the rating of the restaurant, lower is the commission which would be charged on per

order by Zomato.

As per MediaNama report, the restaurants which are 5 starred will be charged a commission

of 7.5% per processed order, meanwhile those restaurants which are 1 starred will be charged

15% commission on every order. Infact, Zomato is so serious about ratings that it has been

made compulsory for the app user: In case the customer forgets to rate the restaurant, he

won’t be able to make the next order unless the previous order is rated.

A big thumbs up for this ‘compulsory rating’ protocol, as it will help the consumers to filter

out the restaurants which are not delivering on quality. And as the reviews are coming in

from mobile app, directly from the end user, it cannot be tampered with.

4.2. Challenges in Online food Delivery

Being in the daily meals market, they have to work with very low ticket sizes starting at

Rs 50/- with no minimum order requirements or delivery cost. Considering the costs

associated with food production, packaging and delivery, maintaining a strong unit

margin is the biggest challenge.

A very high competition is already present in the market, who have set the parameters to

be a successful among customers. Table.4.2

Confusion may happen between the restaurant and Zomato because of which the end

customer will suffer.

Brand Zomato puts its name on stake if anything gone wrong because of restaurants or

the delivery will surely effect its image

Startup Operations in Order

Placement

Delivery

Time

Payment

Mode

Other Features

Bhojanshala Pune Website 30-50 mins COD Daily/Weekly/

Monthly Meal

Packages, Bulk

orders, Party orders,

Corporate orders.

TinyOwl Mumbai Mobile App 45 mins Online,

COD

-

Faasos Mumbai, Pune,

Bangalore,

Chennai,

Ahmedabad,

Baroda

Mobile App 15-45 mins Online,

Faasos

wallet

-

Table 4.2 Different Parameters for online food delivery

References

http://economictimes.indiatimes.com

www.zomato.com

http://forbesindia.com

http://trak.in/