STRATEGY IMPLEMENTATION

Term end report

Strategic Performance Evaluation of Zomato

School of Business Management

Narsee Monjee Institute of Management Studies, Mumbai

Submitted by:
Group – 7
Harsh Daga | F012
Paridhi Dhaniwala | F016
Abhishek Khemka | F029
Bharat Khubchandani | F030
Jeet Shah | F052
Aarzu Wadhwa | F063
Table of Contents
Overview of the Industry................................................................................................... 3
Growth in Indian Restaurant Industry ................................................................................... 3
Online Market Size ................................................................................................................. 4
Global Presence ...................................................................................................................... 4
Global Penetration Level......................................................................................................... 4
Top 5 cities contribution ......................................................................................................... 5
Online business contribution for partner restaurants ............................................................. 5
Strategic Growth – Overall Growth Strategy ..................................................................... 6
Realigning business segments .................................................................................................. 6
Delivery................................................................................................................................... 7
Dining out ............................................................................................................................... 8
Sustainability .......................................................................................................................... 9
Zomato – Creating Value for Customers ........................................................................... 9
Technological Strategy adopted by Zomato to create value for itself and the customers ....... 11
Artificial Intelligence ................................................................................................................................. 11
Data driven analytics ................................................................................................................................. 12
Machine Learning ...................................................................................................................................... 12
Recent acquisition for technological strategic shift ................................................................................. 13

Zomato – Creating Value for Restaurants ....................................................................... 14

Financial Growth ........................................................................................................... 15
Marketing Strategies ...................................................................................................... 16
1. Keeping it simple ............................................................................................................ 16
2. Quality > Quantity .......................................................................................................... 16
3. Targeting audience of age 18-35 ...................................................................................... 16
4. Marketing through Word of Mouth ................................................................................. 17
Learnings ....................................................................................................................... 17
Interactive Control System ................................................................................................... 17
Meeting Strategic Risks......................................................................................................... 18
Leadership in Zomato ........................................................................................................... 18
Overview of the Industry

Growth in Indian Restaurant Industry

Delivery is outpacing the overall restaurant industry growth. Restaurant industry is estimated
to be USD 56 Billion and the delivery industry is pegged at USD 15 Billion. Casual Dining
(44%) dominates the organized segment while QSR is one of the fastest growing segments.

Major factors driving the growth in delivery:

• Changing consumer lifestyle
• Young population
• Increasing disposable income
• Greater share of women in workforce
Online Market Size

Within delivery, online medium is gaining traction. Online food delivery grew at a
staggering pace of 150% to reach USD 300 Million in GMV terms in 2016. Online food
delivery players handled on an average 1,60,000 orders in a day with and average order
value of USD 5.

Consumers accustomed to shopping

online specially in major cities are
preferring online delivery platforms
owing to
• Convenience of scanning menus,
prices and peer reviews across the
restaurant
• Transparency offered
• No travelling
• Ease of payment through various
modes

Global Presence

Global Penetration Level

Top 5 cities contribution

Top 5 cities in India contribute >85% of the overall order volume currently. Bangalore,
Delhi NCR, Mumbai, Hyderabad and Pune contribute ~40% to the GMV of Indian e-tailing
industry and these cities are the top contributors for other verticals too.

Large share of young working population with high disposable income and easy access to
internet through web/mobile has accelerated the growth of online medium in these cities.

Online business contribution for partner restaurants

India is still a nascent market as compared to mature markets like UK where contribution as
high as ~35% to their overall business currently.

Strategic Growth – Overall Growth Strategy

Realigning business segments

Three years ago, advertising represented 100% of Zomato’s revenue and focus. Today,
Zomato is largely a transactions company - 85% of their revenue in March’19 was driven by
transactions. In that spirit, They realigned their business to the core tenets of the food
industry. They have stopped considering advertising revenue as a standalone P&L last year,
and now think of their business as a combination of three key large pillars — Delivery,
Dining Out, and Sustainability.

Here’s how Zomato has fared in each of our three lines of business in FY19:
Delivery

Delivery revenue for FY19 is $155m compared to $38m in FY18 (4x annual growth). It now
contributes ~75% to total revenue, up from ~55% in FY18. Zomato now operate the service
in over 200 cities in India, up from 15 cities in FY18; and have made nearly 33m deliveries in
March’19 (~7x y-o-y growth). Over 100k restaurants are listed in India, generating an annual
run-rate GMV of over $1.5bn ~94% of these deliveries are fulfilled by their ~180k strong
active delivery fleet. Unit economics of the food delivery business have come a long way.
Zomato now lose Rs 25 per delivery, compared to Rs 44 per delivery in March’18. Their last
mile cost per delivery is now Rs 65, compared to Rs 86 in March’18. The key driver metric
of unit economics — number of deliveries per rider per hour has gone up to 1.4 from 0.9 last
year. Important note – some high density neighbourhoods in larger cities are already unit
Economics positive. So are, some Tier-3/4 cities.

With Piggybank, loyalty program for food delivery, users save up to 10% of their total
amount. 2m+ users across 17 cities in India have collectively saved a staggering Rs 260m+.
In the long term, we stay committed to not competing with restaurants — and we will help
the best food operators build larger businesses in every way we can. But at no point will we
compromise our neutrality as a platform.

Here are some interesting nibbles about our India food delivery business:
Dining out

Zomato Gold has partnered with over 10,000 restaurants globally to offer either 1+1 on food,
or 2+2 on beverages, allowing users to get more bang for their buck each time they dine out.
Zomato Gold will continue to be a program that constantly provides benefits that are uniquely
designed for users who see great value in frequently dining out. As on 31 March 2019,
Zomato had over 1m active subscribers of Zomato Gold globally compared to 170k active
users as on 31 March 2018. Zomato has recently launched Zomato Gold in 4 new cities
outside of India — Jakarta, Manila, Auckland, and Beirut. The number of subscribers who
signed up for Gold in the first 15 days of launch in all these cities exceeded the number of
subscribers we added in Bengaluru in the first 15 days.

Last year, Zomato also extended the vision of better food for more people to the workplace.
Through a digitised platform, currently active in seven cities, food@work by Zomato serves
125,000 meals a day, partners with 300 caterers and serves 70 companies. Zomato has also
partnered with Tier–1 caterers like Elior and Voila to the cash-and-carry segment providing
better compliance and food safety. Food@work has revolutionised cafeteria management by
introducing more choice as well as an app to simplify the purchase process for employees.
People are increasingly going online to book tables. Our reservations service is now offered
in eight countries across 16,000+ restaurants. Over 1m diners in India are reserving tables on
Zomato every month.
Zomato has organised Zomaland — a food carnival, a first-of-its-kind across the world, in
Delhi, Bengaluru and Pune. The vision is to champion the restaurant industry — and create a
showcase of the best culinary talent available in a city to our users. Zomaland hosted larger
than- life attractions, street performances, a stellar line-up of music artists and DJs, along
with a dedicated zone for the little ones. Attended by 120k people collectively, featuring over
200 of the best restaurants, it was the perfect opportunity for more people to discover new
culinary delights, as well as enjoy some of their old favourites.

Sustainability

Hyperpure was launched in August 2018 to supply fresh, clean ingredients to restaurants.
This first-of-its-kind initiative uses an end-to-end technology-driven platform custom-built to
provide online access to fresh and clean food ingredients to restaurants. In February 2019, a
30,000 sq. ft warehouse, built to serve 4,000 metric ton capacity per month, was launched in
Bengaluru to cater to 2500 restaurants every day. An even larger 40,000 sq. ft warehouse in
Delhi was launched in March’19.

Restaurants buying ingredients through Hyperpure are recognised through a ‘Hyperpure

Inside’ tag on Zomato, allowing users to trust that the food they are eating is made using
fully-traceable, high quality ingredients.

Zomato is also helping farmers develop better crops that are pesticide and chemical-free,
providing them assured demand cycles and better pricing throughout the year. Hyperpure is
solving a number of supply-chain problems and simultaneously building a more ecological
model with plans to integrate rainwater harvesting, and composting for waste.

Zomato – Creating Value for Customers

Over the world, eateries are contending with, and picking up offer from home-cooking. Their
capacity to do so depends upon four parameters. The four parameters are: QAAA
 Quality
  Accessibility
 Affordability
 Assortment

These four parameters are major cause of shifts in consumer trends from homemade food to
restaurants and eateries.

Zomato works by making the restaurants accountable for the quality of food they serve to
their customers. Zomato offers reviews and ratings for every restaurant on its app which
counts as one of the biggest reasons for delivery or for dining in. A high evaluation on
Zomato not just shows the incredible experience an eatery offers, it likewise drives further
development through footfalls and higher spends. In a few markets, Zomato works with cafés
to conduct external quality audits in order to showcase and adhere to the highest quality
standards.
Zomato improves availability by giving access to live data. Its food delivery services are also
constantly geared towards offering faster services, to more people and at reduced costs in
order to reflect reduced service cost for customers as well.

Zomato improves affordability by making it a level playing ground for everybody. By

making information transparent, Zomato ensures consumers can make informed decision and
in a way ensures competition is democratised. Zomato Gold, a new intervention introduced
by Zomato last year and which has witnessed subscribers grow manifolds improves
affordability for users and in turn helps restaurants increase revenues as well. It has partnered
with more than 10,000 restaurants globally for the same.

Zomato drives assortment by providing its customers a wide variety of tastes and experiences
from around the world. Through this, Zomato also encourages restaurants to act on live
customer feedback obtained on these new experiments and improve accordingly.

Zomato is also venturing a new segment which is also aimed to act as one of its major
revenue sources. Hyperpure is the name of the new venture which is mainly focused on food
sector. It is a clean food supply chain being managed by Zomato to ensure fresh supply of
high quality ingredients to restaurants. The initiative is tying up local farmers and suppliers
with restaurants and hence removing the role of middlemen. People are increasingly going
online to book tables. Our reservations service is now offered in eight countries across
16,000+ restaurants. Over 1m diners in India are reserving tables on Zomato every month.

Zomato also worked on increasing value for consumers at workplaces for extending their
vision “better food for more people”. They built a digitized platform, which is currently live
in seven cities known as food@work by Zomato where in it has partnered with 300 caterers
and 70 companies and currently serves about 125,000 meals in a day. The idea is to make the
entire ordering and payment system digitized, ensuring customers order and receiving time is
reduced.

Zomato has also worked on creating value for employees where in it is providing maternity
leave of 26 weeks on company’s payroll irrespective of the gender. It is rolling out
endowments of $1,000 per child for its employees becoming new parents.

Zomato has also been increasing its employee pay scale in order to value their efforts and
ensure better services to customers.

Technological Strategy adopted by Zomato to create value for itself and the
customers

Artificial Intelligence

Recently Zomato has raised Rs 284 crore from a US investor Glade Brook Capital Partners as
part of its strategy to acquire more market share from its rivals. Last month Zomato made a
claim of achieving a 28 million monthly order run rate as of December compared to the 21
million in October which also helps the company in projecting future order volume.

Zomato is using AI algorithms to improve product UX, through personalization and superior
features, as well as to drive more efficiencies into our commercial and operational verticals
across both online ordering and restaurants listing business.

Natural Language processing adoption can greatly help the platform in serving wider
geography without having to consider linguistic boundaries that enables search using
colloquial terms which customers could use to obtain accurate results.
Data driven analytics

Moreover, the history buying pattern and the cuisines ordered previously by customers are
being kept a track of in order to provide them with the best recommendations and
personalization.

 Where should I order from?

Earlier, restaurants in the online ordering flow used to appear based on factors
such as popularity, and distance from your physical location. The problem was,
this made the list of restaurants static, and you’d likely have to scroll endlessly to
find that one place you really love ordering from.
To overcome this, Zomato added a layer of personalization using analytics that
helps it put the restaurants you are most likely to order, based on the factors like
search, browsing, and order history, cuisine preferences, average spent etc. This
resulted in checkout conversion by 2.5%.

 What should I order?

Firstly, they identified what type of cuisines a customer typically orders and
pushed it to the top of the page to reduce much scrolling.
Also, they designed a recommended section to better serve the customers using
predictive analytics, based on their past order history and the ratings given to
those cuisines.
As expected, both of these changes significantly reduced the time it takes to build
an order, being placed 21% quicker.

Machine Learning

Solving the logistics problem

Infrastructure still remains the major challenge in India, delivering food at the right time in
the best possible way is a differentiator factor for major delivering companies. Zomato has
started investing in the smart Machine Learning based approach to find out the optimal
shipping route.
This approach not only parses, but also fixes typos/errors in addresses, using a proprietary
generative algorithm based on ‘probabilistic graph models’ and phonetics-based fuzzy
matching. Besides this it also enables them to accurately identify polygon boundaries for each
of their serviceable localities, all of this by leveraging their in-house historical data of
deliveries and location tracking data of delivery fleet.

Solving the image-aesthetics problem

Zomato is building an ensemble model using deep and feature-based learning to assess image
aesthetics of photos uploaded by users on Zomato. Showcasing only high-quality, rich
content from the millions of pictorial UGC added every month is critical, not only for user
experience, but also for ensuring high click-through rates on the platform. It has resulted in a
90% + accuracy for image aesthetics classification.

Recent acquisition for technological strategic shift

As a net part of its strategy to widen its customer base Zomato has invested in drone-based
food delivery. It recently acquired Lucknow based startup that works exclusively on drones.
In terms of the long-term strategy, Zomato is taking baby steps towards building a future
where the delivery be done by drones. Empowering robots for last mile delivery are the focus
of CEO, a significant area of investment to remain competitive and ahead in the growing
market segment. This is second acquisition of Zomato after hyperlocal logistics startup,
Runnr.

Zomato – Creating Value for Restaurants

The value created for restaurants by Zomato is simple, the restaurants pay zomato for being
featured, the users view the restaurants and the restaurants get more customer footfalls. The
increasing number of users for zomato have been an attractive point for restaurants.

It enables restaurants to:

 Event Management
 Targeted Advertising
 Customer Service and Engagement
 Managing Online Presence
 Track Performance
 Improved Visibility

With Zomato Gold, Zomato has increased the footfall to restaurants offering gold, multifold.
This is because the restaurant gives a drink or food item free to the customer but in turn gets
heavy rush on his outlet.
Furthermore, new restaurants get a “beta period” on Zomato – their overall rating starts
showing after 60 days, regardless of the reviews and ratings they receive in that time. Further,
the initial few reviews gathered during that 60 day period do not count towards overall rating
forever – although these reviews emain visible on their Zomato pages.

During this phase, these restaurants get a ‘New’ tag on Zomato to help users identify them
(this will be in place of the rating tag shown against a restaurant name on Zomato). This way,
restaurants get direct, valuable feedback from their customers to fix any problems that may
crop up during the very early days, without worrying about the existential concern of a low
restaurant rating.

All in all, The Restaurant business is fragmented, and Zomato is creating an all in all value by
tying up the industry.

Financial Growth

Since the launch of Zomato gold in 2017, it has seen a tremendous growth in the reach to its
customers. It has 1m active subscribers of Zomato Gold globally as on 31 March 2019 as
compared to 170k active users last year. It has partnered with over 10,000 restaurants
globally so that more users can dine out by giving them the benefits of enjoying 1+1 on
drinks or 1+1 on food.

Outside India, they have reached launched the Zomato Gold in four cities- Jakarta, Manila,
Auckland, and Beirut. It has over 16000+ restaurants all over the world. Of which, 1m diners
are reserving their tables in India every month through Zomato Gold.

Marketing Strategies

Although before launching in India, Zomato Gold was previously launched in UAE and
Portugal, there still continued the need to understand the Indian market and adapt their
marketing strategies accordingly.

1. Keeping it simple: Zomato has tries every offer to Indian customers like different
offers on different menu items different offers at different type of restaurants, ,
different offers at different points in time, etc. However, the best practice it could
derive for its customers was keeping the product simple. Zomato Gold marketed itself
as the product as Terms and Conditions Free. The more simple it sounded, the better
it was to capture the minds and heart of people. The users got attracted to the simple
philosophy followed by the company and hence lead to added traffic.

2. Quality > Quantity: Zomato believed that rather than offering their product to every
restaurants and expanding their accessibility, it is better to offer the product to quality
cafes/restaurants and stick to it. According to Zomato data, with over 100000+
restaurants in India in 2017, they selected 1% of it on the basis of ratings and
popularity and considered them as their “Right Set” for their product. The company
still abide by its rule and offers their product to small and yet efficient number of
restaurants.

3. Targeting audience of age 18-35: Zomato Gold is often used by the customers who
like to dine out more. Hence, it is most appropriate for teenagers and adults within the
age bracket of 18-35. It consists of people going to colleges and offices. Zomato
believes that there is an experience that is needed to be built around food and through
 the launch of Gold they had made that happen. It has positioned itself as the brand
that brings together the suppliers and customers and provide them the platform

4. Marketing through Word of Mouth: Zomato Gold has witnessed its growth through
the word of mouth. Understanding the pattern of how key players in e-commerce are
expanding their reach, Zomato also launched extra discounts through referrals. The
company derived 40% of its revenue through referrals. The extra incentive to both
referrer and referee helped to drive the sales of Zomato Gold.

Learnings

Interactive Control System

Interactive Control System reinforces the importance of the interactive system, which
circumvents problems and aims to provide answers to management elements that were not
considered in the previously developed strategic planning process. Thus, the interactive
control concerns the system that involves managers in the decisions of subordinates; this
system’s focus of attention is on the aspects of control that do not routinely appear in
information systems.

Interactive systems of control are used to guide the informal strategic process, forcing the
involvement of staff in organizational issues. It has been used to promote interchange
between top management and other hierarchical levels, and a mechanism for interaction and
permanent dialogue between the members of the organization.

In Zomato, Culture was developed among senior management and junior management in a
way that they can approach each other and openly discuss about the problems that they are
facing. They also discuss about the company strategy and senior management team take the
opinion of their employee.

They also have yearly event where Zomato ask their employee about innovative extension
that they can make in their current business. The selected team gets the chance to develop
that idea along with the business development team.
Meeting Strategic Risks

Zomato is the key player in online food delivery that focuses on providing more options and
the best restaurants to have food delivered from. Therefore, to sustain in the competitive
market, Zomato needs to focus on its vision and provide the services they are best known for
i.e. availability of quality restaurants.

Zomato is planning to launch Zomato Valet, premium service in food delivery, that will
expand the choices for customers. Valet will help the customers to order from premium
restaurants that don't deliver food online. This will not only lead to more options to order but
also will help in achieving economies of scale since the food order will be of comparatively
higher amount and last mile delivery will provide an extra advantage.

For its loyal customers, Zomato is planning to launch Zomato Treat. All the orders placed by
the loyal and regular customers from their partner restaurants will be complemented with a
dessert under Zomato Treat. The membership fee is kept as low as ₹299 for a year in India. It
stimulates the customer to order from Zomato.

Leadership in Zomato

Zomato , a company believing in a start-up culture follows a Democratic Leadership. The

entire team working at Zomato i.e. the leadership team to the new hiring they do, the focus is
on building a brand wherein everyone is free to express their views and add to the growth at
their own individual levels. The CEO, Mr. Deepinder Goyal has continuously displayed the
qualities of turning imaginative product ideas into successful brands such as creation of
Zomato Gold, creation of an optimized channel wherein Zomato has been able to successfully
drive down per customer costs. Also, Zomato is working on a new initiative Zomato Infinity,
again connecting different hotels with Zomato Gold. The leadership team also displays
qualities of managing different organizations under Zomato i.e. their delivery part, the
Hyperpure initiative etc. Also, the leadership team focusses on building their team with
motivated individuals with a zeal to work in a start-up environment rather than hiring
individuals with glorified degrees. They wanted to build cultural company.