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Prashant Raman
To cite this article: Prashant Raman (2018): Zomato: a shining armour in the foodtech
sector, Journal of Information Technology Case and Application Research, DOI:
10.1080/15228053.2018.1552396
Article views: 5
ABSTRACT
Purpose – The purpose of this case is to understand and study the life cycle
of a technology start-up (Zomato in this case) right from scratch to its
growth and consolidation phase. The consumer’s approach for information
and the choice of decision-making related to products and services have
changed considerably in the digital era. Zomato is one website/application
that has pioneered the online search for information related to restaurants
in India. The case tries to evaluate the opportunities and challenges faced
by a start-up in an extremely competitive industry and deliberates on how
an online restaurant discovery business can be monetized into a highly
effective and profitable business. It also examines the diversification strat-
egy (natural and acquisition) employed by Zomato.
Design/methodology/approach – The case uses secondary research
method. The information, interview excerpts and data related to the com-
pany are gathered from different sources such as online databases, maga-
zines, personal blogs of founders and company websites. The case covers
a wide range of topics and can be helpful to undergraduates, MBA students
and executives in courses such as entrepreneurship, digital marketing,
strategic marketing, and marketing management. Majority of the students
and executives are familiar with the company and their personal experi-
ences can definitely improve the class discussion.
Findings – This case identifies the different factors that were instrumental
to the success of Zomato, its various revenue sources, its development
through new products and services and growth expansion through acquisi-
tions. The company which was primarily known for restaurant reviews
gradually expanded into other areas of foodtech business like online order-
ing and delivery of food, table bookings, and developing applications soft-
ware for managing the operations of restaurants. Soon after conquering the
Indian market, Zomato successfully expanded to international markets
particularly Europe, US, UK, and Middle-East.
Practical implications (if applicable) – India is at the cusp of a big
e-commerce revolution. In the last 4–5 years, the e-commerce industry in
India has witnessed a lot of activities. Many new companies have entered
the arena, some got merged, a few got acquired and some had to shut up
shops. The hottest trend which is driving the market today is of aggregators
and one such aggregator market is the foodtech sector. In the Indian start-
up e-commerce industry, Zomato is one tale that every Indian entrepreneur
will want to imitate. It is one inspirational start-up that gives insights into
inventive marketing techniques and services and shows how to diversify
risk by getting into other similar businesses and when and how to opt for
natural growth and expand through acquisition.
Originality/value – The Indian technology start-up ecosystem is currently
in an embryonic phase and companies are still trying to figure out the best
path to success. This case gives an insight into the online restaurant
discovery market and Zomato’s rise in the highly cash-risk industry. It
provides a step-by-step analysis of the various strategies implemented by
CONTACT Prashant Raman prashantraman5@gmail.com Banasthali Vidyapith, P.O. Banasthali, Newai, Rajasthan 304022, India
Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/utca.
© 2018 Prashant Raman
2 P. RAMAN
Zomato in different situations. The case study helps to enhance the existing
research done in the field of entrepreneurship and marketing management.
It provides the budding entrepreneurs and marketing practitioners a bird’s
eye view to building a company from zilch.
Background
India is at the cusp of a big e-commerce revolution. In the last 4–5 years, the e-commerce industry in
India has witnessed a lot of activities. Many new companies have entered the arena, some got
merged, a few got acquired, and some had to shut up shops. Yet, if there is any sector that is
attracting attention of both investors and consumers, it is the e-commerce sector. The hazy picture
of e-commerce is finally emerging clearer and structured. The hottest trend which is driving the
market now is of the aggregators. The role of aggregators is to bring all the information related to
a certain product or service to one place and create an information ecosystem that can serve as a one
stop information centre for the customers.
One such aggregator market is the foodtech sector. The foodtech market represents the online
food ordering and delivery ecosystem. Over the years, foodtech market in India has been growing at
a healthy rate, and according to the TechSci Research report (2016), it is expected to grow even more
at a Compounded Annual Growth Rate of over 12% during 2016–2021. This growth is anticipated
because of the rise in the personal disposable income, increase in internet penetration and growing
number of smartphone users (see Exhibit 1). Another important factor propelling the demand of
foodtech in India is the large base of young population, mostly residing in the urban areas of the
country. These young consumers who constitute the majority of the workforce are getting busier,
have less time for household activities and hardly any time or energy left for cooking a good meal.
The notion of ordering food online is also gathering momentum due to various options offered by
the companies such as home delivery of food, preferential methods of payment, and attention-
grabbing deals and discounts offers.
Food aggregators operate as intermediaries between customers and restaurateurs. They offer
customers different alternatives to choose from diverse cuisines from various restaurants and food
outlets registered with them. In the Indian start-up e-commerce industry, which is still in the
budding phase, Zomato is one tale that every Indian entrepreneur will want to imitate. It is one
inspirational start-up which is prospering because of its inventive marketing strategies, services, and
its focus on ease of use of the complete ecosystem right from application to the website. The
company, with its sole aim of connecting customers with the restaurants online, has, in a span of
eight years emerged as not only the country’s largest online and mobile restaurant discovery service,
but as a world leader with more than one million restaurant listings across 10,000 cities in 24
countries, ticking on an average of over 80 million monthly visits.
The beginning
Mr Deepinder Goyal and Mr Pankaj Chaddah both IIT Delhi alumni were working at the Delhi
office of the management consulting firm, Bain & Company. Living away from home, they were
always worried about finding suitable restaurants for good meals. The two would often go out for
lunch and return with a number of menu cards from various eateries nearby to select their next
meal. They met many others who were also on the lookout for good food plazas. They then
recognized that it would be a good idea to put this list online and create something substantial to
assist people to elicit information about eating and food joints, and the idea of starting a food
aggregator popped up in their minds. As part of their leisure pursuit, they went around the suburbs
collecting as many menu cards as possible from restaurants and uploaded the scanned menu cards
along with the contact details of the restaurants on a website to enable people to order food over call.
Mr Goyal says, “A lot of people at Bain started using the service [ordering from menu cards collected
by them] and then we eventually expanded it to Delhi NCR (National Capital Region). It was a very
slow growth curve in early years.” This leisure time activity of theirs slowly became a huge success
and they stepped over to the next level by creating the website Foodiebay.com. Formally launched in
July 2008, the website commenced with a listing of more than 1200 restaurants in Delhi and NCR,
and by the end of 2008, it surpassed the 2000 restaurant listing mark. In the subsequent 6 months,
Foodiebay extended its operations to Kolkata and Mumbai as well.
Day after day, the two of them started adding additional features to the website Foodiebay.com.
The website which kick-started as a basic menu card search engine gradually developed further with
the addition of new elements like photographs, contact numbers, maps, user ratings, reviews, etc.
The founders wanted it to be recognized as a good social network platform for food and restaurants
and introduced social features to the website like creating user profiles where different users could
not only follow each other, but also contribute content and proffer their individual opinions. Based
on their reviews, the users were awarded titles like “Foodie” and “Big Foodie”, and depending on the
number of their followers, they were recognized as “Super Foodie” and finally as “Connoisseur”.
After one and a half years of working on weekends for foodiebay, both Mr Deepinder Goyal and
Mr Pankaj Chaddah decided to quit Bain. The decision was quite easy to make as they had started
getting queries from restaurants to advertise on their website. Both of them realized that a feasible
expansion of the business was possible in the near future and a substantial revenue model could be
created out of it.
About Zomato
In 2010, Foodiebay was renamed as Zomato since the founders expected the company to grow and
branch out into other categories as well and they did not want the current brand name to restrict it
to only food and restaurant business. The other motive to change the brand name was its similarity
in nomenclature with ebay – Foodiebay and they did not want to take undue risk while building
a brand. Thus, Zomato came into existence!
Zomato is an online portal or a foodtech platform focussing on providing information about
restaurants, coffee shops, and nightclubs and also helping the customers with home-delivery options
4 P. RAMAN
and other dine-out choices. Riding on the success of its robust search and discovery venture,
Zomato, in recent years, has also set up its transactions business. Its innumerable products and
services ensure that “nobody has a bad meal”!
Zomato plays a crucial role in building a restaurant ecosystem. Its reviews and rating system
guide the restaurants to enhance their discoverability and services. The restaurants now take
advantage of Zomato’s intense local advertising platform to get connected to more customers.
Moreover, with the inception of features like Zomato Order and Zomato Book, restaurants are
able to expand their delivery business and improve the efficiency of their table reservations,
respectively. The main objective of the company is to create an avant-garde technology to help
restaurants get connected with the customers in a way that would bring about a major transforma-
tion in the industry.
The mission of Zomato is “nobody has a bad meal” and they fulfil this objective in three different
ways:
Capital investment
Being a start-up, the company required substantial capital to fund its day-to-day activities and
ambitious expansion plans. Zomato, in August 2010, received an initial investment of $1 million
from Info Edge, India. Mr Deepinder Goyal recalls his first meeting with Mr Sanjeev Bikhchandani,
founder of Info Edge (India) Ltd. and says, “The day we went to meet him, he asked if we were looking
for money. We told him yes and within 15 minutes he promised a $1 million cheque for a 33% stake in
the company.” Satisfied by the company’s exceptional growth, Info Edge decided to increase its stake in
the company. In September 2011, Info-Edge invested $3.5 million in Zomato and in the years 2012 and
2013 upraised its third and fourth rounds of funding to $2.5 million and $10 million, respectively. Info
Edge, at the end of this period, had approximately 58% stake in Zomato. Looking to future develop-
ment and supporting the expansion plans of Zomato to other geographies and new cities in India, in
2013, Sequoia Capital and Info Edge infused another $37 million in the company. In 2014, when
Zomato’s valuation touched $660 million, three investors: – Info Edge India Limited, Vy Capital, and
Sequoia Capital, collectively invested $60 million in the company. Sequoia capital had tremendous faith
in the founders and Mr Mohit Bhatnagar, MD, Sequoia Capital India, at the time of investing in
Zomato, mentioned, “Zomato is the first Indian consumer internet company to build a significant
international footprint, and we have made this investment because of our strong conviction in the
founders, the world-class product they’ve built, and their ambitious global vision.” The year 2015
witnessed two more rounds of funding for Zomato, first in April 2015 when Info Edge India Limited
and Vy Capital invested $50 million and second in September 2015 when Temasek Holdings and Vy
Capital flushed $60 million into the company (Entrepreneur Middle East, 2017). Mr. Alexander Tamas,
Founding Partner, Vy Capital, while investing in Zomato said, “Zomato is one of the first Internet
companies out of India with a consumer product that is scaling on a global basis and a team that is
executing extremely well against the opportunity. We look forward to being long-term partners of the
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 5
company as it establishes itself among the global Internet leaders” (Afaqs, 2014) The most recent
funding was of $20 million by Sequoia capital in April 2017. By the end of 2017, the total funding
received by Zomato reached to around $244 million (see Exhibit 2). Foreseeing the immense growth
potential, Nomura, a financial services company, raised the valuation of Zomato to $1.4 billion till
March 2019.
Business model
Zomato has a host of options that drives revenue for the company. It has five products/offerings
(Exhibit 3) that largely contribute towards the revenue stream (Exhibit 4).
● Advertisement/Banners
● Online Ordering
● Zomato Base
● Table Reservation/Zomato Book
● Zomato Whitelabel
Advertisement/banners
Zomato’s advertising is very precise; when customers search for a particular keyword, only those
restaurants’ advertisements are displayed that are relevant to that search string. This makes the
Zomato application highly focused and also hyper local. Mr Deepinder Goyal believes, “Restaurant
owners have the option of advertising on our highly targeted platform. Given that our advertising
model is hyper-local, businesses can display advertisements to hungry consumers looking for dining
options in a specific area” (Outlook Business, 2014) The revenue from advertisements accounted for
$38 million in FY17 which was 58% higher than FY16. According to an estimate, around 72% of the
revenue for Zomato came from the advertisement business.
Online ordering
Zomato has a different order delivery mechanism as compared to the other players in the market. It
does not have its own delivery system, and when a customer places a request for food, the restaurant
fulfils that request through its own delivery mechanism. Zomato makes an average commission of
8.5% through this channel. For the financial year 2017, food ordering accounted for $9 million in
revenues, around 8 times of what it did in 2016.
Zomato base
As part of its expansion plan of venturing outside the food listings and search business, Zomato
started a point of sale cloud-based system for restaurants called Zomato Base. This helped restau-
rants to manage their businesses by accessing operations from a single platform. The application is
useful in creating an improved coordination between the front-end staff and the kitchen staff.
Besides that, it also works with other restaurant-based applications that are readily available in the
market and can be configured according to the requirements of the restaurants. Some of the notable
features of Zomato Base are organizing menus, administering the stock, recipe management,
customer profiling, digital invoicing, etc. Zomato Base, according to the company in April 2017,
was under paid beta trials at over 200 restaurants and no revenue figures have been disclosed.
Zomato Whitelabel
The Zomato Whitelabel is a collection of technologies that helps restaurants to build their own “plug
and play” customized mobile applications. While this application allows the customers to reserve
a table by using their smartphones, it facilitates the restaurants to directly connect to the customers.
The pricing for this service is based on a monthly subscription model of approximately Rs. 13,350
($200) per location, and these custom applications are also incorporated closely with Zomato’s
service for business, bookings, orders, and payments.
Currently, Zomato has divided its operational markets into two divisions: (a) full stack where
Zomato has elevated levels of traffic and aims to monetize through advertisement sales and (b)
enterprise markets where the traffic is not sufficient yet, and the focus is on its enterprise products.
The company now has two sales teams – one focusing on advertisement sales and the other focusing
on the enterprise products.
Marketing strategy
Initially, the company began with four direct marketing strategies like short message service (SMS),
email marketing, weekly newsletters, and pamphlet distribution. By using direct SMS technique,
Zomato targeted 6 lakh unique customers in the first phase. It sent messages about the company
offerings, discount details, deals available at different restaurants, etc. to its customers. As SMS reach
individuals directly, they believed that this approach would help in increasing their brand awareness
8 P. RAMAN
and demand at the initial phase. The email marketing technique helped Zomato to reach out to large
business houses and companies where they targeted the professional employees. The main motive of
the mailers was to attract and compel the employees to read their offerings during breaks in the
office hours. The third strategy Zomato adopted was of sending weekly newsletters to the subscribers.
This marketing technique was employed more as an engagement mechanism. It helped in creating
a halo effect for the brand and resulted in better brand recall. Most of the contents in the newsletters
showcased best shopping deals and helped in planning one’s weekends. The last technique they used
was distributing pamphlets in specific locales. It has been a long-drawn tradition in India for people
to accumulate pamphlets, brochures, and handouts for future use and reference! The pamphlets were
specific to Zomato’s business and were eye-catching and colourful.
Zomato quickly gauged the magnitude of social media existence. It recognized that Facebook and
Twitter could be used as tools to create a larger social media brand and thus embraced the new age
marketing techniques and revamped its marketing strategy in four different ways: content marketing
strategy, social media strategy, image marketing strategy, and marketing through YouTube.
Image marketing
Zomato is big time on mobile application image marketing. It is a general notion that the more
visually appealing the images are, the more responsive will be the customers. Zomato focuses on
making the images of food as captivating as possible so that the customers get engrossed in it and are
enticed to click on the buy button! Moreover, Zomato adds a tinge of fun and humour to its graphics
which makes reading and looking at the images much more exciting. Zomato also associates itself
with the current or upcoming events in the country like festivals, sporting events, etc. through well-
designed images. If the customers are really into a particular event, then it is highly likely that he/she
is going to order food from the application. Zomato makes it a point to charm its customers with
tempting graphics and images and offers a unique platform for customer engagement (see Exhibit 5).
IT implementation at Zomato
Start-ups are usually faced with investment challenges especially at the initial stages of their growth.
A traditional business requires a lot of investment particularly in managing the overhead costs like
rent of the location, staff, and other utilities. Zomato, being a start-up, was not in a position to meet
the investment demands of a traditional business. The founders started their business with a bare
minimum investment which only an IT-based system could have supported. Zomato started its
operations from home, thus eliminating the need for a rented location and renovation and also saved
up on the repairs, security, and staff costs.
10 P. RAMAN
Zomato wanted to develop a system where the customers could search for a list of available
restaurants nearby while sitting at their homes or on the go. To offer these services and regularly
update the new and upcoming restaurants, IT-based system was an ideal proposition for Zomato.
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 11
The IT-enabled solution provided all these facilities to the customers at a simple click of a button,
thus making it convenient for the end user.
The other governing factor to opt for IT-based business is the accessibility to the customers.
Zomato is available 24×7 to its customers. The idea is to provide a platform where customers can
discover a restaurant at any time of the day irrespective of weekdays, weekends, and holidays. And
this could only be achieved by a fully automated system.
Zomato is into the business of providing services to its customers and does not offer a physical
product. Hence, it is comparatively easy to provide a service in an IT-based environment where the
user is searching for information, ordering online, receiving recommendation, etc. and does not
mind interacting with a machine as the process is standardized.
After taking into account all these aspects, Zomato decided to select an IT-based business and
very soon they realized other benefits of implementing technology in their business:
● The scope of business became unlimited and the ability to scale up their operations to other
parts of the world by using technology became less difficult.
● Accuracy of processing the transactions increased and less errors were encountered as the
system got automated and required no human interaction.
● Scalability of the business became easy as the system only required little twitches according to
the specific needs of the country. The manual intervention got restricted to collecting the
restaurant details, menus, etc., and rest of the processes and procedures were driven by the
existing technology.
It is said that “Every coin has two sides” and Zomato soon realized the challenges associated with
using technology. On the one side, Zomato relished the opportunities and benefits of using an IT-
based business, but on the other, it was accosted with some serious challenges. It was becoming
difficult for Zomato to keep pace with the dynamic nature of the technology and it was even tougher
to recruit and retain the right talent.
Technological challenges
There are certain factors that determine the success of any business. Precise market study, choosing
the latest technology, and the future vision of the company are few of them. Technology has proven
its role by increasing the market share, creating competitive advantage, and improving financials for
the company. In the current digital era with plethora of data available, Information Technology can
be used as a weapon to gain an edge over the competitors. A company can gain valuable insights by
analysing the data and make improved decisions and can also plan to scaleup in the future.
Zomato quickly realized the challenges associated with the implementation of technology and
worked towards ironing out the issues and started to adopt the latest technologies available in the
market. A team of developers was formed inhouse under the leadership of the founders, and they
started working together to create a platform that provided an engaging user experience. In order to
achieve this, they created UX (User Designs) instead of UI (User Interface). UX helps in creating
a smooth interaction between the company and the customer which results in increase in customer
satisfaction levels and loyalty.
Over the years, Zomato slowly but gradually built a formidable team of passionate IT profes-
sionals who were capable of working on cutting edge technologies like machine learning (ML),
artificial intelligence (AI), Cloud-based services, etc. Zomato steadily emerged as a leader in using
niche technologies and started using several open-source technologies like Redis, MySQL, Krati Data
Store, Apache Thrift, JavaEWAH Compressed Bitmaps, Faye, JRuby, NodeJS, and PHP to make its
platform more robust.
The dynamic nature of technology posed the following other challenges for Zomato:
12 P. RAMAN
Spam control
Another challenge is posed by the restaurant owners who post fake reviews on Zomato’s website
which leads to higher ranking of the restaurants in the search options. It then becomes difficult to
filter out the genuine reviews. Zomato is coming up with an automated filter system that will
automatically nullify such tactics used by different restaurant owners.
Competitor analysis
Since Zomato is expanding radically, it faces stiff competition in the areas of its operation from the local
and international players. The company has been able to grow from scratch (natural growth) in 16
countries and through acquisition mode in 8 countries. The foodtech market is dominated by companies
like Yelp, OpenTable, Foodpanda (Acquired by Ola), Swiggy, and Burrp (acquired by BookMyShow).
Domestic competition
Foodpanda
Probably one of the biggest rivals of Zomato in the domestic market is Foodpanda. The company has
its head office in Germany and is a global player when it comes to delivering food. Similar to
Zomato, the company gives access to its customers to pick any restaurant of their choice and request
for food delivery through mobile application or website. Foodpanda boasts of a restaurant listing of
more than 27,000 across 190 cities worldwide and manages around 15,000 delivery riders globally.
Foodpanda which was founded in 2012, four years later than Zomato, is already active in 40
countries and is considered to be the biggest competitor of Zomato in Indian market. With more
than 15,000 restaurant listings spread over 100 different towns and cities of India, its revenue for
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 13
2016–2017 was Rs. 621.6 million (approx. $9.1 million) (The new Indian Express, 2017). The Indian
operations of Foodpanda was acquired by Indian cab-aggregator Ola in 2017.
Swiggy
Another company that is growing at a brisk pace in the domestic market is Swiggy. Swiggy became
operational in 2014 and is headquartered at Bengaluru, India. The company provides its food lovers
an easy access to order food and also delivers it to their doorsteps. The company is under the wings
of Bundl Technologies Private Limited. Swiggy, which has only a nominal presence (eight cities) in
India is swiftly expanding in the country. The company has, however, more than 12,000 restaurants
listed on its platform. It has an exclusive group of delivery staff which delivers the orders to the
customers. More than 1 million Swiggy applications have been downloaded till now and the platform
has witnessed 1 million orders in April 2016. Swiggy’s revenue increased by 200% to reach Rs. 23.6
crores ($3.6 million) in FY 2016 from Rs. 12 lakhs ($18,000) in FY 2015. The losses, however, also
swelled to Rs. 138 crores ($21 million) in FY 2016 as compared to Rs. 2 crores ($328,500) in FY 2015
(One Million, 2017).
Burrp
Burrp is one of India’s oldest foodtech companies. The company came into existence in 2006. It has
more than 60,000 restaurants listed on its platform across 12 cities. The revenue for the company in
FY 2016 was Rs. 5.7 million (approx. $83,000). Burrp at one point of time was a high-flying
performer in the restaurant exploration market until Zomato created ripples and gained
a substantial market share. It was one of the first companies to concentrate on user-generated
content in the food and drink segment and was built on reviews and recommendations posted by its
trusted users. The online entertainment ticketing company BookMyShow acquired Burrp in 2017
(Livemint, 2017).
Global competition
Yelp
By far, the biggest competitor for Zomato in the global foodtech arena is Yelp. It was founded in 2004
and is a US-based organization. The company lists reviews written by the users covering different
restaurants and cafes and also provides assistance in reserving the table at the restaurant through its
online reservation service called Yelp Reservations. The company’s core strategy is to build user
communities, and these ardent “Yelpers” go around different places writing reviews and populating
Yelp’s database. Besides composing reviews, the users get into conversations with other members of the
community and chalk out gatherings, get-togethers, parties, etc. Yelp also educates and guides small
restaurants and businesses to respond to user reviews, organizes social programmes for reviewers, and
also helps in performing data analytics for the restaurants. Yelp proffers access to restaurants to refresh
their contact details, add or delete any listing information, and provide provision to incorporate special
offers. The company witnessed around 170 million unique monthly visitors in 2016 and about
110 million reviews listed on its website. Its revenue was $713 million in 2016 (Nasdaq, 2016).
OpenTable
Founded in 1998, OpenTable is a US-based organization. It is a restaurant reservation platform
where users can book tables in their favourite restaurants. In 1999, the company commenced its
business by offering reservations at a small range of restaurants in San Francisco. OpenTable
connects diners to restaurants and helps them to explore and book the right table. OpenTable also
14 P. RAMAN
supports the restaurants to provide customized services and increase repeat customers. Restaurants
that registered with the OpenTable use the company’s software to process the reservations made on
the website, resulting in a real-time reservation system for both diners and restaurants. The company
now boasts of listing of more than 40,000 restaurants on its website and has seated close to 1.3 billion
diners across the globe. The users are able to book the restaurant table at no cost but the company
charges restaurants a monthly fee for using their system. In 2014, OpenTable was acquired by The
Priceline Group for $2.6 billion and the revenue generated in 2013 was $190 million (ZDNet, 2014).
The year 2015 saw Zomato’s first product acquisition MapleGraph (Entrepreneur Middle East,
2017). MapleGraph was an Indian start-up that developed a point of sale product for the restaurants
called MaplePOS. Zomato eventually rebranded it as “Zomato Base”. With this acquisition, the
company moved a step closer to become a one-stop shop for both the customers and the restaurants.
To give a strong competition to contenders like Yelp, OpenTable, etc. in the US, Zomato acquired
NexTable(Entrepreneur Middle East, 2017), a US-based restaurant reservations and table-
management company in the same year. In due course of time, NexTable was renamed as
“Zomato Book”. This acquisition gave Zomato another offering to complement its existing restau-
rant listings and review services. In 2016, Zomato bagged an Indian logistics technology company
named Sparse Labs(Entrepreneur Middle East, 2017). Sparse Labs had built a mobile application that
worked on Android operating system which passed on the exact location of the delivery person to
both the restaurants and the customers in real time. The acquisition was significant for the company
as nearly 80% of its delivery orders were fulfilled by the restaurants, and there was a dire need to
oversee and control the delivery of the food ordered. In the year 2017, Zomato acquired a last-mile
logistics company Runnr (Entrepreneur Middle East, 2017). Runnr was a hyper-local logistics service
provider enabling restaurants to deliver orders by connecting with a local delivery fleet. The
company as of now is operating as an independent entity and continues to offer its services to
other companies also. The acquisition has helped Zomato strengthen its food delivery business (see
Exhibit 6).
The various acquisitions of the company have increased its worldwide presence to 24
countries. The aim of becoming a one stop shop for food lovers was also achieved through
these acquisitions. And this objective is very well articulated by Mr Pankaj Chaddah when he
says, “We want to be the Google of food. Our vision is to be the global platform when someone
is looking for food locally”. Customers are now able to search for different restaurants, read the
other user suggestions and reviews, and also book a table; all at one place! The company is now
offering services like Zomato Base where it allows restaurants to update their menus, deals, and
discounts on a real-time basis. This actually helps Zomato to increase its revenue from multiple
sources: (1) revenue generation through advertisements, (2) commissions on table reservations
booked through Zomato Book, and (3) selling customized products like Zomato base, Zomato
Whitelabel, etc. to restaurants.
Operational efficiency
Another important challenge faced by the company is efficiency. There are some fundamental
challenges in the Indian market. India is a low-ticket size and a low-margin business for the
companies to operate. Majority of the restaurant businesses in India are not making substantial
profit and hence it becomes very difficult for a company like Zomato to charge a decent sum of
money from the consumers/restaurants to make it operationally sustainable. The companies that are
able to develop low-cost ways to operate and innovate and create value for their customers and
restaurants will be able to survive (YourStory, 2017). To overcome these challenges, Zomato
gradually forayed into offering different products and services to increase its sources of revenue.
Innovative products like Zomato Base, Zomato book, and Zomato Whitelabel, along with consulta-
tion services to the restaurants, have made the revenue model of the company more sustainable.
Disruption in technology
With the growing internet penetration and increasing number of smartphone users in India, many
players are entering the foodtech industry. These new entrants may bring innovative technologies in
the market to gain competitive advantage and create an imminent possibility of disruption in
technology in the industry. It is a very big challenge now for Zomato to maintain a technological
competitive edge over its rivals. The company is now implementing new technologies like ML, AI to
enhance UX and to improve its efficiency in the online ordering and restaurant listing business
(Analytics India Magazine, 2018).
Growing competition
The competition in the foodtech sector is growing every day. There are many food aggregators in the
market like Yelp, Swiggy, Uber Eats, Zagat, etc. who are regularly enhancing their services and
products. Zomato will have to continuously improve its service offerings to remain relevant in this
space. It is already facing a stiff competition from Swiggy in the online food delivery service and the
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 17
sales of Swiggy is now almost comparable to that of Zomato’s. Mr Deepinder Goyal, however, is
unfazed by the competition and believes, “There are a lot of players out there covering different
aspects – online ordering, delivery and local search. But our competition is fragmented which makes
it easy for us. We’re not really worried about competition.” Zomato aims at a holistic approach to the
whole foodtech business. The company provides value to its customers at every stage of dining
experience. From providing restaurant searching options, to placing an order online or booking
a table, and paying the bill, Zomato is able to fulfil all these requirements of a customer through its
application. The competitors at present are not able to offer all these services together at one place.
Moreover, the “feet-on-street” model of continuously gathering and updating restaurant information
by Zomato’s sales staff gives the company a massive lead over its competitors. The other important
advantage that Zomato has over its competitors is the huge existing customer database that they can
leverage upon. The newer players on the other hand have to acquire customers to sell their products
and services (Business Standard, 2016).
● There are some international markets that seem absolutely ready to embrace a company like
Zomato but socio-economic factors of the country like labour cost act as a hinderance.
● The other challenge associated with expansion is the ease of doing business with local restau-
rant owners. These markets are at the maturity stage where the restaurants use their own
applications and websites to cater to the requirements of the customers directly. Hence, it
becomes difficult for Zomato to negotiate any kind of deals with these restaurants.
● The foreign government rules, laws, and regulations, along with uncertain and chaotic business
environment, are another big challenges for the company. Zomato has to face numerous issues
like submitting documents to incorporate the company in the foreign country, understanding
and dealing with their labour laws that are different from the domestic markets, and getting
restricted access to basic business services.
● The consumer behaviour in countries that are already developed like United Kingdom is very
different from a developing country like India. Consumers in the developed countries are more
technology savvy and react to design flaws in the product as compared to consumers in India
who are more concerned about other issues like securing a good deal and searching for better
price options. Zomato keeps this in mind and offers different services to different consumers.
(Goyal, 2016)
Zomato tries to overcome these expansion challenges by conducting an in-depth research of the
market. It first makes a list of countries and cities that look feasible to conduct business on a macro
level and then sends its staff to the short-listed places to collect information regarding the number of
restaurants and possibility of a profitable partnership with local players. The staff also demonstrates
the features of the product to the customers to analyse and understand their mindsets. This helps the
company to identify the customization required in the existing product, feasibility of conducting
business, its future growth prospects, and the market to be focussed on a priority basis (YourStory,
2013b).
18 P. RAMAN
Future of Zomato
Zomato has come a long way since its inception in 2008 (see Exhibit 9). The growth has been
exceptional for the company after its rebranding. The company has started making profits in
countries like India, UAE, New Zealand, Philippines, Indonesia, South Africa, Qatar, and
Lebanon. A closer look at the financial status of the company reveals that the revenue has been
increasing consistently. From Rs. 20 million (approx. $0.37 million) in 2011–2012 to Rs 3323 million
(approx. $48 million) in 2016–2017, the company has seen a phenomenal growth in the revenue
figures (see Exhibit 7). On the other hand, the company has also seen an increase in its losses. The
revenue to loss ratio has increased in 2016–2017, and the ratio 2.18 is in fact the best ever achieved
by Zomato. Since the food delivery business in itself is not sustainable, Zomato has identified certain
core strategies to focus on. The company has been clearly concentrating on them right throughout
their growth stage. These strategies are niche market strategy, new revenue streams, global expansion
strategy, and talent acquisition strategy.
Initiatives like Zomato Base, Zomato book, and Zomato Whitelabel are already making waves
around the world. These are paid products and services offered by the company to the restaurants
and customers. The latest of all offerings is Zomato Cashless that helps the diners to pay their bills, at
the participating restaurants, using the Zomato application from their mobile phones in lieu of
paying cash or swiping their cards. Zomato charges the restaurant a commission which ranges from
7.5% to 15%, depending upon the rating of the restaurant (see Exhibit 8).
entrepreneurial spirit, the company also looks for four essential traits in people during the recruit-
ment process: “ethics”, “respect”, “attitude”, and “skills”.
Notes on contributor
Dr. Prashant Raman is an associate professor at the Faculty of Management Studies – WISDOM, Banasthali
University, India. He has over 10 years of experience in both industry and academics and teaches marketing
management, strategic management, e-business, and consumer behavior to undergraduate and postgraduate students.
Prior to joining Banasthali Vidyapith, he worked with Satyam Computer Services Ltd. (Now Tech Mahindra) as
a relationship manager for around 7 years where he was instrumental in handling ramp-ups and bulk requirements for
clients like Master Card, Google, Apple, Microsoft, Motorola, etc. He has extensive experience in the areas of client
relationship management, training & development (t&d), business analysis, resource management, internal talent
management, and cost optimization. His areas of research interest include e-commerce, consumer behavior in the
digital age, and green marketing.
JOURNAL OF INFORMATION TECHNOLOGY CASE AND APPLICATION RESEARCH 21
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