India’s overcrowded food-delivery segment seems to have a winner.
By December 2018, Bengaluru-based Swiggy held nearly half of the market share by transactional volume in the Indian online food-delivery space, according to data from market intelligence firm Kalagato. Zomato was a distant second with just over 26% share, the data shared with Quartz show.
“Swiggy has become India’s go-to app for food delivery. Their focus on logistics has paid great dividends to the company,” said Aman Kumar, chief business officer at Kalagato.
The six-year-old startup has had an impressive run over the past few years. In mid-2018, Swiggy became India’s fastest startup to turn unicorn. By the end of that year, it had raised $1 billion to expand its delivery network, explore cloud kitchens, and even grow internationally.
However, Zomato can’t be written off just yet. It remains a formidable player with a higher reach across urban and rural India.
“Those who believe Zomato has lost the battle to Swiggy would do well to remember that Zomato operates in multiple countries and has built a different niche for itself by focusing on Gold (membership programme) which has found phenomenal success with diners,” Kumar said.
Foodpanda falls, Uber’s up
In December 2017, ride-hailing giant Ola acquired Foodpanda in a $200 million, all-stock deal. By early 2018, Foodpanda’s share of transactions superseded Zomato’s and the company was making big strides.
Its deep discounting strategy, however, wasn’t sustainable. The average order value for Foodpanda declined drastically from over Rs300 to under Rs120 during 2018.
“If the average order value is down by two-thirds, either a company has been discounting its users’ spends or customers aren’t spending enough,” said Kumar. This, while incumbents Zomato and Swiggy moved further away from the cash-burning model, slashing discounts by 40%.
Now, Ola has decided to reel back Foodpanda. At the end of May, it began to delist third-party restaurants from Foodpanda and said it will focus on its own cloud kitchens and private labels.
Meanwhile, Uber Eats, owned by Ola’s rival Uber, has grown stronger. In October 2018, it said India was its fastest-growing market.
However, survival is a task. Already, the commission earned by Uber Eats has dropped 4% year-on-year in the quarter ended March 31, half of which was attributed to increased investments in its India food-ordering unit. It also reduced marketing spends and consumer incentives to avoid getting bruised badly in the food-tech battle.
Is the company still bullish about India’s delivery scene?
“Uber Eats growth has been phenomenal over the past one year, but both the food-delivery sector and the taxi industry are witnessing intense competition,” said Kumar. “It will be interesting to see how Ola and Uber balance the funding needs of their core business and delivery in the coming year.”
Considering taxi is Uber’s core business, if Ola raises a billion dollars, Uber would likely match or trump it. If Swiggy raises a billion, though, will Uber invest as heavily? That remains to be seen.