DYNAMICS OF ZOMATO

DURING THE PRE-COVID

AND POST-COVID PHASES

Group-14 | Section-D | Term-1

MBA Analytics 2022-24

Submitted to:
Prof. Vaibhav Bhamoriya
Submitted to:
Prof. Mala Srivastava
Submitted by:

Apurwa Sawarkar- MBAA22015

Priyanka Raj- MBAA22055
Saumya Gupta- MBAA22061
Suprava Ghosh- MBAA22077
Deepak Bhatt- MBAA22085
 Contents

1. About the Company.......................................................................................................2

2. Business Model………………………………………………………………………..2

3. Market Research………………………………………………………………………3

4. Market Size………...………………………………………………………................3

5. Indian Food Delivery Market Structure: Bertrand Oligopoly……………………….4

 Primary & Secondary Research Deductions

 Customer’s feedback

6. Primary Research…………………………………………………………………......5

7. Demand and Supply Analysis. ……………………………………………………….6

 Demand Drivers on the basis of Primary & Secondary Research

 Demand and Supply Constraints
 Demand Shift

8. Pre and Post Covid Analysis of Zomato’s Economics………………………………...9

9. Government Regulators…………………………………………...………………….11

10. Pricing and Discount…………………………………………………………………12

11. Conclusion…………………………………………………………………………...13

12. References…………………………………………………………………………...13

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ABOUT THE COMPANY
The food tech unicorn, Zomato was created by Deepinder Goyal and
Pankaj Chaddah in 2008. It is quite famous and widely used
throughout the country and expanded in overseas markets as well. It
currently serves 10,000 cities in 25 countries. In FY22, a revenue of
over 55 billion INR was reported by Zomato. The major part of the
revenue of the company was from food deliveries.
Zomato charges a 20-25% commission from the restaurant for each
order placed. In some regions, the commission rate may vary from 5-
7%.

BUSINESS MODEL
The robust business model of Zomato is the key to its success. Zomato is an 'App Model'
which is spread over food delivery and grocery delivery.

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MARKET RESEARCH
The online food delivery market in India is one of the few industries that is developing at a
double-digit CAGR and has stimulated investments into it. Zomato's valuation has increased
from $3.9 billion in December to $5.4 billion as a result of a fresh $250 million investment.
In a similar vein, rival Swiggy and SoftBank are in final negotiations for Swiggy to invest up
to $450 million in a meal delivery business, valuing it at $5 billion.

MARKET SIZE
The Indian online food delivery market is expected to exhibit CAGR of 28.9% during 2022-
2027.The below mentioned graph portrays the trend of increasing market size of the industry.

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INDIAN FOOD DELIVERY MARKET STRUCTURE:
BERTRAND OLIGOPOLY
Primary & Secondary Research Deductions:
1. Consumer Preferences: The food industry in India is all about a few firms serving many
Customers. The major share of the Food delivery market in India is divided between two
players Zomato & Swiggy, although there are fewer known local players competing for
market share as per Bernstein research 55% of the market share lies with Zomato 40% with
Swiggy and the rest 5% lies with other players same have been observed by the google form
and telephonic survey where 88% market share lie with them.

Fig.1.Primary Research Consumer Preferences

2. Homogeneous Products- Zomato and Swiggy mostly offer identical products in terms of
the number, quality of the food delivered, and delivery time. Therefore, they try to outdo each
other with the help of different logistics, realization and segmentation techniques. In addition,
Swiggy is trying to focus on its delivery ecosystem and enter new areas like groceries, drugs,
etc Zomato's main focus was building a restaurant chain but the acquisition of Blinkit earlier
this year by the company, shows Zomato being entering the groceries delivery segment

3. Price competition- The market is price sensitive in India, players opted to run heavy
discount strategies for customer acquisition. Earlier in 2018/19 business was highly
competitive with multiple participants, but now it seems more a duopoly & reliance on food
delivery services developed during COVID and restaurants had no other source of income
than delivery, a change in the transfer of the discount burden to restaurants and other
partners. In the case of Zomato above-mentioned statement is supported by secondary
research says Zomato only contributes a minor portion of the discount, with restaurants or
other third parties like payment solutions providers or banks contributing up to 5% of the
total discount.

4. Customers have perfect information and there are no transaction costs - Customer
loyalty is not the major contributing factor in the choice between the services, rather delivery
time and discount are major factors.

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5. Barriers to entry exist -As online meal delivery grows in popularity, it also brings with it
entry barriers for new businesses and the possibility of cannibalism for current players because
of declining customer loyalty, an uncertain pricing strategy, logistical difficulties, inconsistent
food quality, the presence of giants having established a partnership with restaurants.

Deductions
The adoption of digital services by small cities and the branded food service ecosystem will
drive the growth of online food delivery products. Investments in the Indian online food
aggregator market by established industry players such as Zomato and Swiggy are steadily
increasing the earlier oligopoly market between different players now cut to these two major
players who survived tough competition as well as pandemic making the market more of a
duopoly on the surface also if might possible that by adopting digital transformation
unorganized local players in Tier I and Tier II cities and towns and may limit the development
of organized players.

Customer’s feedback on Zomato

Fig.2.Consumer’s opinion about Zomato from Primary Research

PRIMARY RESEARCH:
Google form survey Telephonic Conversation

Number of respondents: 100 Restaurant Name: Vyanjan , Ranchi

Link: Consumer Survey Data  Orders through Zomato: Swiggy is 40:60
 Swiggy is capturing the market rapidly

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DEMAND AND SUPPLY ANALYSIS
The graph presented below has been deduced from the data collected through secondary
research. ’Quantity demanded’ depicts the orders and ‘quantity supplied’ represents the
revenue (data has been collected through financial statements) of Zomato. Also, the frequency
of orders has been collected and presented through the graph on the basis of consumer
responses.

Fig 3: Frequency of Orders (source : primary research) & Demand & Supply(source : Annual report)

Dynamics of Quantity Demanded (Orders Supply

Zomato received) (Revenue/Sales)
In millions

Pre-Covid 403 1357.47

During COVID-19 239 1845.87

Post-Covid 445 4108.50

Demand Drivers on the basis of Primary & Secondary Research

Pricing The restaurants listed on Zomato differ in pricing the items on the menu as
compared to the walk-in restaurant. This has been a critical factor considered by
consumers when deciding their preferences.

Coupon & MNCs do provide Sodexo meal cards to their employees which can be used at
Discounts Zomato to order meals. Also, Zomato’s discounts such as first-time orders, 50%
off, etc are major drivers of demand

Population & Population plays a huge role in increasing the demand for online food delivery.
Lifestyle With an annual growth of 2.32% year-on-year, the increase in disposable
income pushes consumers to buy online food.

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 Delivery With a presence in 300+ cities across India Zomato is growing at a
Location & steady pace. Reaching the remote areas can result in growth in the
reach average orders per day to

Time With the busy lifestyle and economic growth where both the partners in
shortage the family working, there’s no time to cook the food and hence, Zomato is
acting as the bridge to fill in the gap

Substitutes Swiggy is a major competitor currently growing rapidly in cities across

India as per the data collected through primary research, it clearly states
the rival is giving tough competition with every 3 Swiggy orders received
at the restaurant for every 2 orders for delivery through Zomato,
availability of substitute is an important factor affecting sales.

Income Comparing pre-covid, covid19 and post-covid earning potential of

consumers, income is an important demand driver as per the responses
collected through the consumer survey

Demand and Supply Constraints

The research methodology used for the collection of facts and data:
 Consumer survey was performed (via Whatsapp, LinkedIn & Instagram)
 Telephonic conversation with the restaurant owner

Basis the Primary research, the constraints identified are as follows:

Income There has been a decline in the purchasing power of consumers as per
the data, average per order pre-covid was high, during covid-19 it
declined, however, there is an increasing trend at a decreasing rate in
the post-covid scenario.

Customer The latest news is proof that Zomato is in the negative limelight due to
relationship the behavioral aspects of delivery partners with the consumers. This has
affected both the demand and supply of orders in various states wrestling
in losses for the company.

Employee Employee protests and lay-offs are more often these days due to the low
Protests salary of delivery partners and restaurants’ behavior towards them. This
results in the non-availability of delivery partners on particular days
leading to a gap between demand and supply.

Timing During peak hours, the restaurants charge high as compared to normal
days in turn delivery charges are increased too, hence, consumers need
to pay more than the expectation leading to less satisfaction

Substitutes Several players exist in the market but the largest amongst them is
Swiggy. As per the research, Swiggy is able to fill in all the gaps
discussed in the above-mentioned points hence, capturing the demand
and meeting the supply of the market.

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 Restaurants As Zomato is a restaurant aggregator and food supplier, the number of
Onboarded restaurants featured on its platform and the types of cuisine they serve
are the most important factors affecting its service offerings. Fewer
restaurants mean fewer offers and vice versa.

1. Average Orders showing the dynamics of Zomato in Pre-Covid, Covid-19 and Post
covid Scenario:

Fig 4: % of orders placed pre-during-post covid phase with frequency of order

Demand Shift
As per the data collected through the survey, consumers accept the fact that they ordered the
highest pre-covid, the frequency of order decreased during covid and increased at a decreasing
rate post-covid scenario. The chart and the table clearly show the shift in the quantity demanded
on Zomato.

Fig 5: Demand shifter (source: Primary Research)

The aforementioned graph depicts that there has been a shift in demand during covid-19 from
once a week to twice a week

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 Dynamics Once a week Twice a week

Pre-Covid 53% 20%

Covid-19 42% 17%

Post-Covid 44% 31%

PRE AND POST-COVID ANALYSIS OF ZOMATO’S

ECONOMICS
Economics based on Key business offerings of Zomato
To understand the profitability of business from pre-covid to post-covid it is important to
understand the key drivers of unit economics on a per delivery basis.
Zomato has shown strong improvement in average order value from FY19 as Rs. 282.1 to FY22
as Rs. 397.31. i.e an increase of 40.79% increase from pre-covid to post-covid.
On basis of the financial report of the company, the economics were calculated:

Year 2019 2020 2021 2022

GOV (in Million) 53900 112200 94800 213000

No. of Orders (in million) 191 403 239 535.2

Average Order Value (INR) 282.1 278.4 396.6 397.9

Considering 2019 as the year for pre-Covid and 2020 as during covid whereas 2021-2022 have
been considered as post-covid.

So, the average unit of the economy for the years 2021 and 2022 was taken, which has been
plotted in the graph below.

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 Fig 6: Average Order Value (INR) (source: Financial Statement)

Post-Covid it has been observed that customers have not resumed dining out vs ordering even
though workforces have moved back to Work-from-home.

The Average Order Value has seen a linear increase from Rs282.1 to Rs.397.31. The key factor
for the increased value of Unit of Economy can be divided on basis of key business offerings
offered by Zomato:

1. Food delivery

In FY22, GOV amounted to INR 213.0 billion, an increase of 295.17% year over year (YoY)
from FY19. Healthy growth in order volumes was the driving force behind this. In general, in
FY22 Adjusted Revenue increased in step with the growth in GOV.
This was a result of increasing frequency of average monthly orders, increasing monthly active
food delivery restaurant partner base, which continued to help numerous restaurants recover
from the impact of Covid, and an increase in the average monthly active delivery partner base,
which grew. Zomato has increased meal delivery offerings to over 1,000+ locations. Currently,
GOV from the new market area is relatively low. To capture first-mover advantages and gain
profit with the growth the company entered these markets.

2. Hyperpure

Using 20 warehouses, Hyperpure increased its footprint in 10 Indian cities in FY22 and
supplied 51k different eateries. Revenue growth for Hyperpure was mostly attributed to the
addition of new clients and the company's development into new cities.

3. Dining-out and others

Due to the closure of the majority of our international businesses in order to concentrate solely
on the India business, revenue declined in FY22. Throughout the year, the company also shut
down several non-core operations. Post-covid, people like ordering takeout over dining out.

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Contribution of Gross Order Value per business offering by Zomato over FY19 - FY22 for Pre,
During and Post Covid.

Fig 7: Revenue generated by Zomato across business offerings (source: Financial Statement)

GOVERNMENT REGULATORS
India’s most important regulatory body is the Food Safety and Standards Authority of India
(FSSAI). The law mandates that those who hold an FSSAI license guard against food fraud.
They are in charge of ensuring that the food being served to customers is devoid of adulteration
and other potentially harmful components.

While the increased GST burden from the beginning of this year has already resulted in high
pricing for food ordering apps, rising fuel prices are hastening delivery costs, which places an
additional burden on consumers. Many food delivery services, including Zomato, are being
compelled to spend a significant amount of money to cover their gasoline costs as a result of
the growing cost of fuel. They claim that they spend between INR 9,000 and 12,000 a month
to pay for their fuel.

Government regulation on Zomato pre-covid Government regulation on Zomato post-

covid

The FSSAI emphasized the need for
experienced workers to safely complete the last
mile of food distribution. Compromising food
product safety will not be acceptable. The
guidelines state that when food is delivered, it
should still retain 45 days, or 30%, of its original
shelf life.
The government has asked e-commerce FBOs
to submit ideas for enhancing the system for
resolving customer complaints. The FSSAI's
usage of screening and approval processes is
crucial.

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PRICING AND DISCOUNT
1. Pricing
Zomato has 2 types of pricing models:

Kilometer-based pricing Slab-based pricing

The delivery partner receives Rs 25 for travel The system defines a number of price slabs
under 4 km and an additional Rs 6 per kilometer for creating charges. The price is computed
for travel exceeding 4 km under this price and an invoice is raised in slab-based
structure, which is distance-based. pricing.

Starting from the moment the valets take the Slabs use ranges that are expressed as sets
customer's order, the distance between the of units. Price per unit and fixed price are
restaurant and the latter is determined. the two ways that units can be charged.

2. Discounts
While some restaurants use discounts to entice new customers or increase kitchen efficiency,
others have used a dynamic pricing strategy whereby food item prices are listed higher than
menu prices in dining areas before being subjected to significant price reductions. Many
restaurants that are Zomato Pro members (a subscription that offers a variety of benefits,
including steep discounts for Rs200 for 3 months) are responsible for bearing the cost of the
discount themselves and anticipate that higher volumes from Pro members with high order
frequency will make up for the price impact.

Discount structure of Zomato pre-covid Discount structure of Zomato post-covid

Since there were many competitors in the Right now, Zomato only contributes a minor
market in FY18 and FY19, Zomato financed portion of the discount (about Rs 8.3 per
the majority of these discounts. order in FY21 versus Rs 21.7 in FY20), with
restaurants or other third parties like
payment solutions providers or banks
contributing up to 5% of the total discount.

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CONCLUSION
The development of online delivery services in India is accelerating. Even if there has been a
slowdown in the market because of consumer purchasing habits that have been affected by
the deployment of lockdown and the fear of COVID-19 spreading. The demand for online
food delivery services has increased after the lockdown on the hotel-related industry was
eased. Zomato has made numerous measures to address the COVID-19 situation and
endeavors to support its partners. A drop in ordering can be noted in the primary research of
consumer preferences, although it has been observed after covid demand rises and AOV
increased and Zomato comes out to be a strong player. According to the report, clients are not
devoted to a single service provider. Given the high customer demand in rural areas, Zomato
should grow there. In order for food to be delivered on time, the quality of the meal and
logistical problems must be resolved.

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 References

1. Annual Report:
https://b.zmtcdn.com/investor_relations_documents/Zomato_annual_report_2022_16
59701415938.pdf
2. Dolat_Capital_Zomato_Initiating_Coverage :
https://drive.google.com/file/d/1KBcrMG5v1nEJvRmv2qcyxBwje1qZ4Ovs/view
3. Managerial economics & business strategy by Michael R Baye , McGraw Hill
publication
4. The duopoly in the Indian food delivery ecosystem
https://www.monetrix.in/2021/10/the-duopoly-in-indian-food-delivery.html
5. Modi government writes new rule book for Big Basket, Swiggy & Zomato :
https://m.economictimes.com/news/economy/policy/food-inspector-tightens-
ecommerces-safety-belt/articleshow/67280363.cms

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