How Zomato Works: Online Food Delivery App Business Model Explained

Tags: fast food delivery, food delivery apps, food delivery service, home delivery food, local food delivery, zomato home delivery, zomato online delivery, zomato order food online

 

“What’s the rating on Zomato?” has turned into the default reply to “Should we go to this restaurant?” in numerous countries worldwide. This change didn’t happened overnight; the team at Zomato is behind it for almost a decade now. Let’s see how their success looks like:

Zomato is an on-demand food delivery platform having a presence in more than 23 countries. It empowers individuals to get food from local eateries and restaurants delivered at their doorstep for a small fee. The platform also provides information about close-by restaurants, their menu cards, average cost, ratings and reviews.

Zomato delivers food with the assistance of their human network. Much the same as Uber drivers, Zomato food delivery guys get an order on their cell phone and GPS is utilized by the organization to coordinate demand and supply in the shortest possible time.

Zomato’s unique business model has gotten a good measure of funding from investors and has helped the organization gain an extensive user base. Zomato was launched in the year 2008 with the name Foodiebay and in a short period, it has turned out as a gigantic success.

Zomato Stats and Facts: Funding and Major Milestones

• Launch Date: July 10, 2008
• Founders: Deepinder Goyal and Pankaj Chaddah
• Funding received by Zomato: $653.8M in funding over 11 rounds
• Annual Revenue: More than $46.6M
• Company Valuation: over USD 2 billion
• Active Users: Serves more than 50M users every month

 

How Does Zomato Make Money – Revenue Generation Model

Zomato just released its FY18 yearly report, and the numbers are looking truly strong. Zomato’s overall revenue was $74 million (Rs. 480 crores) in FY18, up almost 45% from $51 million a year ago. Zomato now makes money from different verticals. It has its original marketing business, and over the last couple of years, has been aggressively advertising its food delivery services as well. Recently, Zomato also launched two successful loyalty programs, Zomato Treats and Zomato Gold. Here are the means by which it earns money:

Advertising (62%)

Zomato started as an online restaurant aggregator and still earns the main part of its revenues through its unique — advertising. Zomato gives restaurants, eateries, bars and pubs a chance to advertise on its platforms through sponsored listings, and earns the greater part its incomes through this channel. This contributes to a 62% share of its overall revenue in FY18. It was 78% in the year 2017 as shown by the stats given by Statista.

Food delivery (30%)

Zomato had launched its food delivery services in 2015. In its debut year of operations, food delivery was just 2% of its revenue. Zomato aggressively extended its food delivery services since – in FY18 food deliveries present 30% of Zomato’s overall revenue, turning into the second biggest source of income for the organization.

Others (8%)

Zomato launched its excellent subscription program Zomato Gold in India in November 2017, after piloting it in UAE and Portugal. Zomato Gold crossed 26000 subscribers inside the initial seven-eight hours and in a split second turned into a hit among the clients in India. Zomato says that Zomato Gold now adds to 12% of its monthly revenue.

It implies that going ahead; Zomato Gold will probably turn into a noteworthy revenue contributor for the organization. Similarly, Zomato Treats was launched in April a year ago and offered individuals a free sweet when they ordered food from selected eateries. It contributes to 0.5% of its total revenues.

Going ahead, it looks like the greater part of revenue growth for Zomato could emerge out of its ordering business and membership services. Zomato as of now has most restaurants listed on its platform and is the go-to service for users to find new eateries. It probably understands that it had no headroom to develop its advertising revenues in this vertical.

And cleverly opened new revenue channels, and they are developing quick — while its advertisement business developed just 20% this year, its food ordering business became almost 60%. And, with its membership services developing quick with almost no competitor and half a million waiting list, Zomato could change its revenue profile drastically in the years to come.

How Zomato Works?

Zomato has been effectively growing since 2008. Its upward graphs and success timeline is a result of its adequately creative business plan and a promising revenue generation strategy. Here is a clear picture of how it works:

1) It enables users to search through a rundown of restaurants and select their most loved food from their most loved cuisines via a website or mobile app.

2) Zomato is an astounding platform for restaurants to improve their market presence and grow their user database.

3) Users can see special offers and deals by skimming through the community on the channels.

4) Once the clients choose their order, Zomato gives them the leverage to pay using different mediums.

5) The request received goes directly to the Zomato delivery guys. Then goes to the specific restaurant.

6)  The restaurant then confirms the order and packs it according to the requirements given.

7) Zomato delivery personnel finish the last step by picking up the parcel from the restaurant and deliver it to the user.

8) Meanwhile, Zomato likewise provides restaurants an opportunity to show and promote their cuisines to a huge user base. Restaurants also pay to Zomato for featured listings.

9)  Zomato is a reliable partner for Restaurants hoping to grow their business by expanding their reach and users via online branding.

10) It has partnered with almost every one of the restaurants of the urban areas thus offering its clients a wide variety of food items.

11) Zomato has built up a rating framework which puts restaurants in an order based on their ratings and reviews. The clients rate the restaurants based on the quality of the food, look and feel of their ambiance and their experience.

12)  Its technology enhances the user experience by telling them the distance of a particular place from user’s area, average food price, delivery charge and estimated wait time for the order.

Key Takeaways from Zomato Business Model

Zomato exhibits an ideal journey of a startup that took informed decisions, chose the right time and tapped the correct audience. There is a lot that food startups can learn from the success of Zomato.

A Flexible Business Model Is a Win

Zomato began as a restaurant’s menu listing platform that later on launched a mobile application to order food online and then it started advertising programs. With the evolving world, Zomato changed its business model as well. Recently, Zomato’s CEO said in a statement “Doing food delivery alone is not sustainable”. That means the company is always ready to evolve to reach new heights.

A Sustainable Business Model is a Win Win

Luring users with discounts may work in the beginning, however, is not a sustainable way of working. Revenue model plays a noteworthy role in deciding the destiny of a startup. To keep up net revenues a business should utilize extra income streams, (for example, advertisements, online ordering, and memberships) in addition to the essential income channel.

Focus on Customer Experience

Customer experience can make or break your business. Putting resources into it is always a great move. With online food ordering platforms, the customer’s desires vary. They expect their food to be delivered in minimum possible time. In this manner, a robust customer support should be set up to guarantee smooth customer experience.

Wrapping Up

Zomato story is inspiring in all angles for every entrepreneur. The essential reason behind its wonderful achievement is the conviction and the desire to explore new possibilities in various challenging stages.

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