Zomato is winning the contest with Swiggy

A joke has been doing the rounds on social media following Swiggy's annual statistics release, highlighting order volumes. Notably, biryani reigned as the top choice for the eighth consecutive year, with a staggering 2.5 orders per second in 2023. A standout detail was a Mumbai user's massive ₹42.3 lakh spend on Swiggy, spurring speculation on X (formerly Twitter) about the possibility of this user being rival Zomato.

In the world of food delivery services, Zomato and Swiggy stand as direct competitors. Their core business is delivery of food, linking a vast array of restaurants and cloud kitchens to a shared customer base. Many eateries partner with both, and it's common for customers to switch between the two apps seamlessly.

Both companies have expanded their offerings to include speedy grocery delivery through Instamart (Swiggy) and Blinkit (Zomato), supported by substantial private equity and venture capital investments. Additionally, they have ventured into the realm of in-restaurant dining. Zomato, based in Gurugram, is a publicly listed company, in contrast to Bengaluru's Swiggy, which remains private.

Intense competition has revolutionised the concept of just-in-time delivery, a change driven by widespread mobile broadband access and a robust digital payment system. Precision in location technology has been pivotal for swift deliveries.

Managing these operations requires highly efficient IT systems for logistics and astute marketing strategies to attract both merchants and customers. Equally important is the role of human resources in maintaining a large workforce of delivery personnel.

Emerging in the market are smaller contenders like Thrive, Waayu, Peppo, and Dotpe, offering lower commission rates compared to the 20-25% charged by Swiggy and Zomato. For instance, Waayu operates on a no-commission, subscription-based model. Thrive, DotPE etc., charge anywhere between 3% and 5%.

Despite these new entrants, Zomato and Swiggy command over 90% of the online food delivery sector, and in grocery delivery, they face competition from local player Dunzo.

Fiscal year 2022 posed challenges for both, as they navigated through significant cash burn, sustaining losses, and costly acquisitions aimed at market expansion.

Recent reports, including data released by Prosus, which holds around 33% stake in Swiggy, indicate Zomato is still ahead, though Swiggy has slightly narrowed the gap. 

Swiggy's core food delivery gross merchandising value (GMV) reached $1.43 billion, up 17% year-on-year for January-June 2023. Its Instamart GMV surged 63% during the first half of 2023, contributing to a combined 28% increase in GMV and a 12% rise in revenues.

In contrast, Zomato's food GMV grew 13% year-on-year to $1.7 billion, with Blinkit's GMV for the first half of 2023 at $506 million. Although Swiggy has gained some market share, Zomato maintains a 54:46 lead in food delivery GMV.

Prosus also said that Swiggy's food delivery segment was not profitable in the first half of FY24, despite earlier claims that it had become profitable by March 2023 when not accounting for ESPOs. This hints that its market share gains might have come at the cost of reduced margins.

(Swiggy said it was profitable as of March 2023, and that its food-delivery business has turned profitable, after factoring in all corporate costs, excluding employee stock option costs.)

Zomato's dip in market share can be attributed to the temporary pause of its loyalty programme and the shutdown of operations 225 cities. Comparing Instamart and Blinkit is challenging due to differing data periods, but Blinkit appears to be gaining more market share.

Instamart GMV grew 63% year-on-year to ₹3,300 crore during January-June of 2023, which was less than Blinkit’s 100% year-on-year GMV growth to ₹4,200 crore in the same period.

Swiggy’s consolidated Ebit loss shrank to ₹1,700 crore in January-June 2023 from ₹2,500 crore in the year-ago period (it had recorded a loss of ₹1800 crore in July-December 2022). Food-delivery Ebitda losses reduced by 90%. Instamart’s contribution losses shrank 75%.

Zomato’s losses in January-June 2023 were around ₹400 crore. Even after exiting 225 towns, Zomato has around 750 towns coverage, versus Swiggy’s footprint across 600 towns.

Consolidated Zomato’s finances in Q2FY24 (Jul-September 2023) include ₹11,442 crore in GMV, up 47% on year. Adjusted revenues were at ₹3,227 crore,, up 57% on year, with adjusted Ebitda at ₹41 crore, an improvement from a loss of ₹192 crore a year ago.

Blinkit's financials are aggregated from 10 August 2022 when the acquisition closed. Blinkit turned positive in terms of contribution margin (as percentage of GMV) in Q2FY24.

Average monthly customers stood at 18.4 million versus 17.5 million in Q1FY24. Monthly order frequency rose 3% sequentially, mainly due to uptake of the Zomato Gold programme.

Blinkit is aiming for at least 100 new stores within FY24 aggregating to 480 stores coverage by end of the fiscal year. 

Zomato's stock price has doubled over the past year as it focuses on profitability, while Swiggy also shows impressive growth. This competition between the two has ultimately led to better services for customers.