INTRODUCTION Group 13

MOS
ONLINE FOOD ORDERING
Online food ordering is a process of ordering food from a local restaurant or food cooperative
through a web page or app. A customer will search for a favourite restaurant, usually filtered
via type of cuisine and choose from available items, and choose delivery or pick-up.

1996–2001 2001–2010 2011–2015

This era is characterized by
the rise of the Internet,
the dotcom boom and the
subsequent crash
Dotcom start-ups
like Webvan, HomeGrocer,
and Kozmo started online
grocery delivery, but ended
up closing in 2001
Major pizza chains have Increased smartphone
created their own mobile penetration, and the growth
applications and started of both Uber and the
doing 20-30% of their sharing economy, food
business online delivery startups start to
receive more attention
again.
This era is associated with
the founding of Caviar and
Instacart
Zomato started its online
ordering operation in 2013,
prior it was a restaurant
listing portal
TWO TIERS FOR ONLINE FOOD DELIVERY
Two types of online platforms have risen to fill that void. The first type is the “aggregators,”
which emerged roughly 15 years ago; the second is the “new delivery” players, which
appeared in 2013 with advent of Zomato Order

Aggregators New delivery

Aggregators build Just like the
on the traditional aggregators, new-
model for food delivery players
delivery, offering allow consumers to
access to multiple compare offerings
restaurants through and order meals
a single online from a group of
portal. restaurants through
a single website or
app.
APPROACH
The on demand food industry has disrupted traditional markets by adopting a full cycle
approach to the three basic components of a meal experience at a restaurant: Ordering,
Cooking and Delivering

Ordering Cooking Delivering

Orders are Cooking is the Delivery i.e. the
customer process of transportation of
requests to preparing meals goods is the
prepare and for customers. backbone of any
deliver food. All Meals could be on demand
food on demand pre-cooked or business.
businesses cooked after an Businesses can
receive orders order is received have different
via an app, a delivery models
website or phone
SERVICE OFFERED
Lifestyle trends and innovation
are changing the way we eat.
Consumers are dining out more
than ever. Their expectations
when it comes to what they want
from a restaurant are changing.
They want their experiences to be
quick, casual and flexible, and
they often want to “dine out”
without actually leaving the house
 Decision Convenience – Making it fast and easy to choose
 Access Convenience – Making it fast and easy to acquire
 Transaction Convenience – Making it fast and easy to pay
(cards, payPal, PayTM, etc.)
 Benefit Convenience – Making it fast and easy to enjoy/use
 Post-Benefit Convenience – Making it fast and easy to re-
purchase (You can save your address and payment details,
bookmark your favorites to re-order in seconds)
GLOBAL CONTEXT
Online ordering as a portion of total dining out spending has been growing rapidly for many
years, but a surge of innovation in online and mobile applications, and payment platforms in
recent years has caused this trend to accelerate. In 2015, 4% of global foodservice value was
generated via online ordering channels, up from just 2% in 2013. By 2020, this figure is
expected to grow to 7%, placing the channel’s value at US$206 billion
GLOBAL CONTEXT
Delivery Demand Is Increasing All Over The World

 Delivery demand is growing at a steady pace in all  The demand is driven by a combination of competitive
world regions. The value of delivery sales in both Asia forces and consumer lifestyle trends, including the need
Pacific and Latin America more than doubled between for maximum convenience from consumers, and the
2010 and 2015, while even the highly mature regions need for operators to make themselves as accessible
of Western Europe and North America saw growth as possible to as many consumers as possible, and
over the period of more than 33%. during as many dining occasions as possible.
INDIAN CONTEXT
With increasing Internet penetration and rising purchasing power, the number of online
shoppers for food are also growing nationally

Over the past one year, there has been an exponential growth in the number of food startups. This area
is garnering investors’ interest, so much so that the market size of food in India is expected to reach Rs.
42 lakh crore by 2020, reports BCG. Presently, the Indian food market is around Rs. 23 trillion.
 Even before Zomato or FoodPanda had made an impression on the smart Indians, there was Burrrrp!,
which is now non-existent and so are other similar websites which mushroomed at one point, but could not
stay true to their value proposition

• There is another service based on the food delivery model - the online grocery market. Some of the
leading names in this category include PepperTap, which recently got some extravagant funding from
Snapdeal and BigBasket. Other services like TapTapMeals exist, which is delivery of “home-cooked”
meals other than the usual global QSR menu
IMPACT
Impact of Online Food Services on Restaurant Business in India

 Besides, the convenience of ordering groceries from your mobile app or web browser has certainly taken
away some market share from the trusted ‘kirana’ or the mom-n-pop stores

 India is the 6th largest grocery market in the world, but the organized sector as run by some of the online
businesses mentioned above makes up only for 5-8% market share of the grocery business

 Obvious impacts on the brick-and-mortar formats of in-dining restaurants as more people prefer to have
restaurant-style cuisines right in the privacy of their homes or workplaces
ENVIRONMENT SCAN
 POLITICAL ENVIRONMENT
• Digital India Campaign would increase Internet penetration in India which will lead to greater access to almost
every market
• Indian government’s focus on Ease of Doing business will help bring more investments in form of FIIs and FDIs
• The government has allowed 100% foreign direct investment (FDI) in online retail of goods and services under
the so-called “marketplace model” through the automatic route, seeking to legitimize existing businesses of e-
commerce companies operating in India
• Energy initiatives, agricultural policies and packaging restrictions affect how you do business. The green
packaging requirement affect the online food delivery business also
• Recently launched Pradhan Mantri Kaushal Vikas Yojana will be focused on enhancing and developing the skill
of youth which in turn will help to get many people with knowledge and skill. E-commerce Industry needs to
increase market penetration and reach, will require skilled people to establish themselves in the new market.

11
 ECONOMIC ENVIRONMENT Growth of online sales (Figures in INR crores)
• The Indian economy is growing at a average GDP growth rate of 7.5% in Year Volume (Rs. Crores) Growth (%)
2015-16 Although, currently the total e-Commerce spend in India accounts Dec- 2008 14030 72%
for less than 2% of the total retail spending, e-Commerce has become a key Dec- 2009 19688 40%
driver to create new markets in erstwhile unreachable geographies. Dec- 2010 31598 60%
• The average annual spending of Indians on online purchases is expected to Dec- 2011 46000 47%
rise 67 percent to INR 10,000, online shoppers spend around INR 6,000 a
year on average
• Half of the country’s population of 1.2 billion are now middle class. The Rising disposable income(Figures in INR)
biggest growth is in those in the lower middle class classification who spend
between $4 and $6 per day
• Indian household saving rates have also leapt. In the eight years from 2005
they virtually tripled as more were lifted out of poverty and found
themselves with disposable income for the first time
• The number of households with a disposable income of more than $10,000
has leapt from around 2.5 million in 1990 to nearly 50 million in 2015,
according to Euromonitor International.
 SOCIAL ENVIRONMENT
• There has been an increase in the middle class Indian working population and substantial change in lifestyle
pattern. As per the survey released by national Sample Survey Commission the proportion of expenditure of
dining out has increased steadily from 19% in 2000 to 30% in 2012
• Reviews and Ratings make the website very engaging which ensures customer participation. The concept of
incentive based rating has also caught up with people and has made them socially active and responsible
• The technologies and market options available through e-commerce foster a true revolution in the way business
structures and relationships are organized. The prospect of establishing new micro, small, and medium
enterprises (SMMEs) is greatly enhanced by the efficiencies available through information and communications
technologies
• Desktop was still dominating for conversion even though mobile browsing is the norm for research
• Consumers if high engaged with a platform or service, the win-win situation between the revenue of the
organization and the value of the consumer is maintained by subscription models
• Chatbots are in many ways the most important breakthrough marketing technology of 2016- and are set to
really come into their own next year. That’s not to say their necessarily the most important marketing tech trend
of all, but many of the important trends like big data
 TECHNOLOGY ENVIRONMENT
• Technological innovation and online engagement are changing the restaurant experience from start to finish.
Consumers now begin to interact with restaurants before they ever set foot in an outlet, and that relationship
between consumer, technology and brand continues even after the occasion has finished
• With the advent of technology, consumers have become used to the immediacy and seamlessness of online and
mobile transactions, and this has changed the way they evaluate all of their experiences, including dining out
• Localization of Internet content: Hindi content searched through mobile Internet grew at even higher rate of
300 per cent in the same period. Growth in traffic in other languages, too, was impressive
• According to Internet and Mobile Association of India, the number of mobile internet users in the country stood
at 173 million in December 2014. It is set to grow manifold by 2020. A Confederation of Indian Industry report
estimates that in the next six years, the number of people accessing the internet through mobile is set to reach
600 million
• Addition of newer and convenient payment systems, to enhance the customer experience on the ecommerce
platform
 IMPACT OF GST
No threshold for GST No Benefit under Tax Collection at Source by No trade barriers, one
registration: Composition Scheme: Marketplace Operator: nation one tax:
Government has Government has Under the new tax regime, E-commerce operators
specified a threshold introduced composition marketplace operators are have set up distribution
limit for all the scheme under GST law mandatorily required to centres only in certain
businesses. However such which primarily aimed to deduct a percentage amount locations and collect the
limit is not applicable in reduce the burden of as the GST liability of seller VAT applicable on sales
case of E Commerce compliance for SME and deposit it with made from such centres.
sellers. All the businesses businesses. Under this government. Eventually the Many states have
carrying out e-commerce scheme, businesses are marketplace seller will have recently imposed entry
activity are required to required to file returns to file monthly return under tax on goods coming
get registered under quarterly and pay taxes GST to claim the credit of from other states. Such
GST irrespective of their at nominal rates up to 2%. TCS collected by the trade barriers will cease
turnover. E-commerce businesses is marketplace operator. This to exist as GST is inclusive
excluded from this scheme. will also impact the liquidity of entry tax
and cash flow of these sellers.
CURRENT EMPLOYMENT POTENTIAL
INDUSTRY STRUCTURE
The online food delivery in India is valued at $15 Billion

Online food delivery in Indi accounted for 17 per cent of the online services market

The total foodservice value in the industry topped $2.9 Billion for the year 2016

This figure is expected to grow at 12% YoY by $2.1 Billion from 2016 to 2020

The average order value for food in India is around Rs. 300
 SCALE OF INVESTMENTS
Food technology start-ups attracted $130.3
million investments
Seventeen deals were concluded last year,
up from five a year ago
The investment flow increased by 93 per
cent

Funding in the FY 2015-16

 MAJOR PLAYERS
Swiggy

Founded in December 2013 in Bengaluru and became operational in FY 2014-15

Present in 8 cities; Bengaluru, Gurgaon, Hyderabad, Delhi, Mumbai, Pune, Kolkata and Chennai with over
5000 restaurants listed on its platform
Swiggy has a simple business model wherein it takes a percentage of orders generated through
app/website as commision from restaurats
Swiggy’s revenue rose to Rs23.59 crore for the year ended 31 March 2016 from Rs11.59 lakhs a year
earlier.
Of this, Rs 20.14 crore was revenue from operations and the rest from other income
Losses bulged to Rs137.18 crore from Rs2.12 crore in fiscal 2015
Total expenses stood at Rs160.77 crore, implying that Swiggy burnt about Rs13 crore per month in FY16
Employee costs rose to Rs54.25 crore from Rs1.24 crore in FY15
Company ended the year at burn rate in the tune of Rs.17.52 lakh per month
MAJOR PLAYERS
Foodpanda

Foodpanda was launched in March 2012 in Singapore and is currently operating in 40 countries across five continents
In India, Foodpanda has established itself in Delhi, Mumbai and Bengaluru, with a presence in 200 other cities
The company is targeting to expand more aggressively in Tier-II and Tier-III cities, with a network of 12,000 restaurants
Foodpanda has reported revenues of Rs 37.81 crore for financial year 2015-16, up 704.4% from Rs 4.7 crore in 2014-15
It also reported losses of Rs 142.6 crore for 2015-16, increasing from Rs 36 crore in 2014-15
Employee cost is the major cost at Rs 640.15 lakh
FoodPanda was in controversy in the year 2014 when it was reported to have boasted of fake restaurants and number of
orders, and inept call centres, all in the name of pushing up its valuation for more funding
The burn rate for FY 2015-16 is at Rs 296.78 lakh
 MAJOR PLAYERS
Founded in 2008 by Deepinder Goyal, Zomato is India’s
largest restaurant guide, listing over 42,000 restaurants in the
country
Only in April 2015, the company ventured into food delivering
Revenues for the company’s Indian operations surged to $49
Mn– an 80% rise over FY16
The average monthly cash burn for the period of December
2016 – March 2017 is a little less than $250K globally,
down from $4.2 Mn last March
The company crossed 2 Mn orders in March 2017 – a move
that gave it a 23% month-on-month growth
Zomato has various revenue sources such as Restaurant
advertising, event advertising, event ticket sales, online food
ordering, consulting services and subscription
 MAJOR PLAYERS
Faasos

The company was founded in 2011 by two friends Jaydeep Barman and
Kallol Banerjee, backed by capital firm Sequoia Capital
In the financial year 2016, the company's revenues grew about 65 per cent
at Rs 61.9 crore as against Rs 37.5 crore in the previous fiscal
However, the company has been able to bring down its losses by 54 per cent
at Rs 111 crore in FY 16 compared to Rs 243 crore in FY 15
The company initially retailed self-branded food from its own kitchens in
about 15 odd cities
The company changed its business model from an inventory based to
strategic partnerships
The company tied up with several home chefs to expand its menu and also
improve its delivery time.
The company has also tied up standalone food joints, restaurant chains and
independent caterers to boost its revenue without having to invest much in
COMPETITORS’ COMPARISON
 DEMAND DRIVERS
Internet Penetration: India's internet users grew by over 28% in
2016 to 355 million users
Mobile Penetration: India’s mobile phone subscriber base crested
the 1 billion users mark
Higher standard of living: With higher standard of living, Indian
consumers don’t shy away from splurging on food in current times
Hectic Lifestyle: With busy schedules, people prefer ordering
food indoors rather than venturing out
Government support: Policies such as Startup India and Digital
India have provided robust infrastructural support
 DEMAND DRIVERS
Cashless transactions: With e wallets gaining acceptance,
users get a seamless experience while ordering food
Intense competition: Intense rivalry in the restaurant industry
has created the need for restaurateurs to advertise
aggressively
Assortment: With online food portals, customers can order
from multiple restaurants at the same time
Restaurant discovery: With newer restaurants, users wanted
a platform where they can instantly discover newer places
Google Maps: The Delivery time is reduced
 BARRIERS TO GROWTH
Growth of Startups: With ease of doing online business, many new players will come in thus
hurting the pie hold of incumbent
Increasing food regulations: With increased food regulations, aggregators also are responsible
for the quality of food being delivered
Low social acceptance: Indian customers still not reliant on the concept of aggregation of food
Delivery times: Startups such as Swiggy and FoodPanda failed initially as the delivery times
reached 1 hour due to operational difficulties
Sustainability of business models: With burn rate going up and huge uncertainty over
customer repurchase, sustainability is a concern
Funding: The trends show drying up of the fundings received by the investors as the companies
are struggle to break even
 BUSINESS MODELS
1. Order Aggregators:
Owned Delivery team:
o Generate orders for restaurant teams
o Subsequently their delivery team is responsible for the last mile delivery
o Revenue majorly in the form of commissions received on the sales generated and
advertising of the restaurants
Outsourced Delivery team:
o The only difference being that the last mile delivery is carried out by third party and pre
decided commission has to be paid
No Delivery team:
o The restaurant partner is solely responsible for the delivery
BUSINESS MODELS

2. Full Stack food delivery:

The objective of this approach is to completely control the customer experience
using all the channel(s) required to deliver it
Holachef and FreshMenu are full stack food delivery startups
These companies have in house chefs who prepare dishes ordered by customers
from a crowd sourced menu
Finally, the delivery is done by the in house delivery team
The disadvantage of this model is that the order has to be pre booked as
instant delivery isn’t possible
BASES OF COMPETITION
1. Gross Merchandise Value: The total transactions which happen on the online platforms
2. No. of Partner Restaurants
3. No. of Users
4. No. of Orders
5. Average Order Value
6. Average earning per order: With respect to the average commission on each order
7. No. of Repurchases
8. Cost of Acquisition of a customer
VARYING STRATEGIES
Content management: With 40% of the restaurants generating 92% of the traffic, content for
these restaurants have gone up in multiples
Market Segmentation: Zomato has divided its market into Stack A (high traffic) and Stack B (low
traffic)
Stack A: Monetization through Ad Sales
Stack B: Order booking commission
More Offerings for business customers: To make the business sustainable, companies are
coming up with table reservation softwares and point of sales systems
Levying Delivery and Surge charges: In lieu of growing customer acquisition costs, pricing rates
have gone high
Laying off Employees: Swiggy and FoodPanda followed a laying off path to cover its costs
Consolidation instead of Expansion: The focus has shifted back on unit economics
Customer Experience: With multiple prominent players, the focus is customer experience to
ensure repeat purchases
FUTURE PROSPECTS
INDUSTRY FORECAST
According to industry experts, almost $700 million of fresh capital has been infused
into the sector in the past four months. Food tech to be a billion-dollar sector in 2
year
the restaurant industry in India grew 11% from 2015 to 2016 but was far outpaced
by food delivery’s 30% figure in the same period, according to a 2017 RedSeer
report. With behemoths like Google and Uber stepping into the field in India,
restaurants’ avenues will expand.

For Zomato: It took the company eight months' time to expand the number of orders
placed from its app from one million to two million orders, suggesting that growth is
now compounding.
Source: http://www.business-standard.com/article/companies/food-tech-to-be-a-billion-dollar-sector-in-2-years-117060400559_1.html
VALUE

We expect online delivery to

grow by 25.0 percent per
year from 2015 to 2018 in
key markets, after which it
will taper off to 14.9
percent per year until 2020
Our research indicates that
online’s penetration of the
total food-delivery market
broke 30 percent in 2016.
We believe penetration
rates will grow further as the
market matures, eventually
reaching 65 percent per
year.

Source: http://www.mckinsey.com/industries/high-tech/our-insights/the-changing-market-for-food-delivery
REVENUE FORECAST
Market is Forecasted to Grow at a CAGR of 15.25% During 2016-2021

United States: Revenue is expected to rise to US$39.9 billion in 2021

China: Revenue in China is expected to increase significantly and will reach a market
volume of US$77 billion in 2021
Europe: Revenue is expected to increase to US$49.6 billion in 2021
TECHNOLOGY
The key catalysts for the adoption of online food delivery are the overall level of
funding for the industry and the size of marketing budgets. Technology penetration—
mainly smartphone and online penetration—has only been slightly relevant to the
speed of adoption so far due to the geographic expansion of food players. We
believe that the food category will grow in line with the smartphone category as new
smartphone users adapt their behavior to take full advantage of the technology.
 Compared to other countries, online-delivery penetration in India is
minuscule. Just 2% of all restaurant delivery orders in India are
made online, compared to 11% in China, 13% in the US, and 32% in
the UK, according to RedSeer. The firm believes the UK is a mature
market while the US and China are in a period of stable growth.
Indian online food delivery, meanwhile, is still in its infancy.

GEOGRAPHY The company will expand gradually in the US, Canada, Ireland and
Italy -four of the nine countries where it had drastically scaled down
WISE operations.

Source: https://qz.com/979543/in-the-year-investors-began-to-lose-faith-in-food-tech-more-indians-
ordered-food-online/
http://economictimes.indiatimes.com/articleshow/59876248.cms?utm_source=contentofinterest&utm_medi
um=text&utm_campaign=cppst
INTERNATIONAL MARKETS
We anticipate China to have an annual
growth rate of 20.9% (2016-21). This
will result in a market volume of
US$77 billion in 2021
Within Europe, Russia is expected to
have the highest annual growth rate,
with 31.3%, lifting the whole of Europe
to an average annual growth rate of
23.5% (‘16-’21) and a total market
volume of US$49.6 billion in 2021.
The Unites States is growing slightly
faster than Europe with a CAGR of
24.6% and is therefore the fastest-
growing region in this comparison. We
anticipate the United States to have a
market volume of US$39.9 billion in
2021.

Source: https://www.slideshare.net/statista_com/eservices-food-delivery
©StatistaDigitalMarketOutlook
 Insights from the data

The respondents who prioritize experience

will look for restaurants which come in Full
service and leisure consumer food service.
In India less than 30% value experience
more than food, an inclination which shows
that online food delivery will satisfy their
need. Experience as a whole might require
considerable level of people processing
and elements of high tech through physical
evidence. The strategy of Zomato valet
might work because with the income going
higher, people would demand food over
experience and look for online food
delivery
 Insights from the data

In the previous data we

concluded where does the
strength for food delivery
lies. The United states ranks
highest on experience then
how has Zomato changed its
strategy is the country.
Here the café’s/bar and Fast
food delivery from the
customer food service is high.
Restaurants classified in
casual dining, quick bites,
pizzeria are delivering
through Zomato.

Countries in which Zomato is present

 Insights from the data

What consumers rank as

most important means
that the consumers are
willing to pay for the
convenience of saving
time if the resulting
meal has a high value.
This means rising
demand for delivery
service,
COMPANY OVERVIEW: ZOMATO Group 13
MOS
ZOMATO: AN INTRODUCTION
Zomato, an online food portal started as Foodiebay, was established by
Deepinder Goyal and Pankaj Chaddah in 2008

The company started as a restaurant search and discovery, now also serves in
restaurant table booking and online delivery segment

Zomato is also introducing newer services such as Zomato treats, to entice

customers and build loyalty

Currently the company operates in over 10,000 cities in 24 countries, and

covers over 1.2 million restaurants

The portal combines the best of restaurant search, social media, and allows
multiple benefits for businesses
42
 ZOMATO IN NUMBERS
Overall Business Delivery Business India listing and
advertising business
 $35 million in bank as of  Food delivery growth is 30%
2016, expected to month on month; daily average –  Advertising business
break-even by 2017 25,000 orders growth – 11% m-o-m
 India active users – 8.5  20% of revenue contribution in  70,000 listings in India;
million; 2.5% have India, overall 7% 6% paid
started placing orders
online  Average order value is Rs. 480  10% penetration in Delhi
for listings
 1900 employees  Contribution margin – Rs. 20 in
worldwide; 1250 in India India, 1.5 times the competition

 Overall revenue split:  Delivery – 80% by restaurants,

India 45%; UAE 20%; 20% by delivery partners
ROW 35% 43
 INDUSTRY ANALYSIS (INDIAN CONTEXT)
Online food delivery

 According to an IBEF report, the organized food business in India is worth $48 billion, of which
food delivery is valued at $15 billion
 The online food delivery segment is growing and innovating exponentially – players compete in
restaurant food delivery, home food delivery, tiffin services, semi-cooked/ready-to-eat meals,
health meals specialists, bulk order specialists, and more
 All portals heavily use social media – users provide ratings for each order received, write
reviews, upload photographs as a part of gamification strategies adopted by these portals
 Partners (restaurants and home cooks) get benefits on the platform based on user ratings and
responses
 The competition in the industry is highly fragmented – and sees a large number of start-ups
enter and exit the industry in 12 months

44
 INDUSTRY ANALYSIS – MAJOR TRENDS
Online delivery and takeaways have grown at 13% in value terms, and 5% and 6% in terms of
outlets and transactions, respectively in 2016
 This can be majorly attributed to growth in number of working professionals, especially women,
in India
 This trend is also attributed to a lot of working professionals living out of their homes, giving rise
to single-portion deliveries, especially in the metropolitan cities
 The growth has been slightly halted by the rise in service tax in the country
 This trend is also fuelled by the ease of convenience of food ordering – consumers can now
order in less than 5 minutes, as major portals offer a wide variety with cashless payments and
hassle-free deliveries
 Services in this Industry are also accelerated by allied services such as delivery fleets
 Most restaurants and food providers are also aiding growth in this segment by providing a large
number of options, cashless payments and heavy discounts to the customers
45
 COMPETITIVE LANDSCAPE
Direct Indirect

Number of Offerings
Restaurant Listings

Market coverage (Number of cities) Market coverage (Number of cities)

46
 KEY COMPETITORS – DIRECT (ONLINE DELIVERY)
 Currently, foodpanda is Zomato’s key competitor in the online food
delivery segment – it operates in over 25 cities in India and covers
more than 8,000 restaurants
 Key advantage/disadvantage: Large number of offers, on-time
delivery, and large user base

 Swiggy operates in a limited number of cities, but provides offerings from

a large number of restaurants, and owns its fleet of delivery agents. It
majorly plays on volumes and offers no minimum order, and partners with
various entities for discounts and deals
 Key advantage/disadvantage: Partnerships with small unlisted restaurants
to provide budget food
47
 KEY COMPETITORS – OTHER SERVICES
 Just Dial operates in all of India, and provides fast, free, and reliable
information spanning across sectors; It provides comprehensive information
about restaurant locations and menu
 Key advantage/disadvantage: Small customer base, low awareness,
diminishing brand equity

 Dineout is an online portal that assists customers in table

reservations in restaurants, and also provides deals and discounts.
Currently in operates in 8 Indian cities.
 Key advantage/disadvantage: Attractive offers at premium
restaurants, deals and discounts

48
 MARKET SEGMENTATION AND TARGET CUSTOMER
Segmentation on the basis of smartphone users
Target group of smartphone users
Application Developer
• Information seeker
• Application Savvy
• High Quality

Network Operator
• Basic service with data on cell
• Data on WLAN only
• Medium overall usage
• Data Usage only
• High overall usage

Handset Manufacturer
• All smartphone manufacturers Source: ResearchGate
 SERVICE DESIGN FRAMEWORK
1. Utility
Service features: Functional aspect of service
• Best in class user interface with investments in
technology and application
• Availability of various payment mechanism and
collaborating with more partners for content

2. Warranty
Service level requirements: Functional and
nonfunctional requirements of service
• Employment of sales staff for adding more
partners
• Investments in servers and frameworks to
monitor and control data security with
authenticity
3. Value
Value proposition: The core offerings for the
target group
• Extensive information about restaurants with
events and need based segmentation
• Availability of real-time information for food
ordering and for post-ordering till delivery
• Night delivery of food
SERVICE DESIGN FRAMEWORK
4. Customer experience
Touchpoints to enhance the customer experience,
this includes awareness, discovery, attraction,
interaction, purchase, use, cultivation, and
advocacy.
• Simple and low data using application
• Availability of information on website and app
• Strong incentive based review mechanism with
volume and value
• Need based segmentation of restaurants,
enhancing customer experience by reducing
time to delivery
• Quicker and convenient payment systems
5. Capabilities and resources
To deliver a quality service requires having the
right capabilities and resources
• Process, policies and hygiene parameters to
manage the core stakeholders i.e. restaurants
• Basic packaging parameters to enable proper
delivery value
• Frameworks to avoid fake reviews
• Matching right customer with right offer by
using big data
• Processes to enable smooth flow of information
information among all the stakeholders during
a pre-booking and online ordering
 BRAND ELEMENTS
Logo: The Spoon!
oReflects passion for food
Brand image:
oYouth centric appeal.
oCampaign of minimalist posters communicated its funny, topical and entertaining appeal
Brand equity:
oZomato initially only into extensive restaurant discovery
oA high percentage of regular restaurant search users turned to Zomato when it started
food delivery
oOnly player to integrate a social network
Brand Experience:
o24/7 Customer care support
oFull menu cards available of each restaurant
oCustomers get to follow the food preferences of friends
 BRAND ELEMENTS
Brand Communication:
oUsed a variety of innovative techniques such as
advertising on porn sites
o The underlying idea has always been quirky
humor
Engagement:
oHigh Social Media traction with the popular
#FoodieFriday quiz on twitter
oFoodsprint and Zomathon for active users
Targeting the Niche:
oZomato knows its primary market is foodies
oThus, the communication always panders to the
foodies
 SERVICE LINE OF ZOMATO
B2B
Zomato Infra Service: Provides shared physical kitchens
to current business owners to deliver their services without
investing in the infrastructure
Zomato for business: An app for restaurant owners to
claim their listing and manage their restaurant. This
allows the owner to:
o Answer reviews
o Manage online presence
o Provide analytics
o Promote special menus and events
Zomato Whitelable: A subscription based model for
restaurants to get customized apps designed by
Zomato.
o Integrated with Zomato’s ordering system
o Testimonials sourced from Zomato
B2C
• Restaurant Search/ Restaurant Advertising: The
customers get to search from a plethora of eateries
while the eateries are given a platform to find
visibility and mindshare of the customers
• Online Food ordering: The customers are given the
option of ordering food online
• Ola Zomato Partnership: Partnership to provide cab
oRdering serive integrated with the app to drive to a
restaurant
o Ola money integrated in the app
• Zomato treats: A subscription based model allowing
specially crafted deserts on each online order
PRICING STRATEGY
Online food ordering:
Tiered pricing
Listing on the app is free for restaurants
For online ordering, the commission slab for restaurant is as follows:
oTop notch (P1 Restaurants): 7.5% of the sales coming through Zomato
oModerately popular (P2 Restaurants): 10% of the sales coming through Zomato
oLesser known (P12 Restaurants): 15% of the sales coming through Zomato
Restaurant Advertising:
The advertising rates is dependant on the area and the concentration of the target customers
in the area
 COMMUNICATION MIX
TV Advertising:
o Zomato started running TVCs 1 year ago.
oThe two commercials played on the emotion of a relationship between
a parent and young child
Social Media:
oCreatives: Zomato creates quirky minimalist poster campaigns which
result in viral images
oEngagement: The Twitter handle instantly resolves queries and runs
activations frequently to build high engagement
The Facebook page generates relatively less frequent content
Events:
Zomato organizes periodically food events such as Zomathon and
Yummistan for its active users
Direct Marketing:
Personalized mails to active users based on their location
DISTRIBUTION CHANNEL

Non inclusive Delivery(Type A):

oZomato has acquired Sparse Labs and renamed it as Zomato Trace
oServes as a free app for the restaurant owners’ delivery team to send tracking
status to customer and restaurant
Last Mile Delivery (Type B):
oPartnered with third party companies such as Delhivery and Runnr for food delivery.
These partners are given a fixed commission of INR 50 on each delivery
SOURCES OF REVENUE
Advertisement Banners: This is when we place banner ads for restaurants on
the website. This accounts for ~75% of Zomato's revenue.
Online Ordering: Commission from restaurants
Zomato Base: POS software
Table Booking: Commission from restaurants
Ticket Sales: Commission, primarily for restaurant venues; accounts for ~15% of our
revenue
Consulting Services: Restaurant chains ask us for advice on where to open their next
outlet/branch. We dig through terabytes of data to tell them where the demand lies
and what's the competition like.
ADVERTISE ON
ZOMATO

How to advertise:

Ad Banners
Additional Exposure in
Collections

Source: https://www.zomato.com/business/advertise
TABLE MANAGEMENT AND RESERVATIONS
Zomato Book
Analytics: Get real-time analytics and actionable insights based on operational and customer
metrics
CRM: Use consumer profiles and transaction history and delight your guests with personalized
initiatives
Smart Table Management: Know the status of your tables in real time, making it easier to manage
tables and avoid manual errors
Reservation Management: Manage all your reservations from a single device using real-time data
on table availability, status tracking, and utilization rates
Staff Management: Manage your workforce more effectively based on metrics such as employee
efficiency, table turnaround times, or occupancy rates
Online Reservations: Allow your customers to book directly from different online channels such as
your Zomato page and your restaurant's website

Source: https://www.zomato.com/book
ONLINE ORDERING

For Merchants

Zomato Order is the best

way to streamline your
restaurant's takeout and
delivery orders
Get a dedicated order
management device, and
access to Zomato-trusted
logistics partners

Source: https://www.zomato.com/business/order
ZOMATO WHITELABEL
Whitelabel powers digital presence for restaurants with beautifully designed full-
service smartphone apps
All apps seamlessly work with Zomato for Business, Book, Order and Base

Highlights: Customizable design, Instant app creation, Low cost, Push notifications,
Online ordering, Easy control, Powerful integrations, Testimonials, Reporting &
Analytics

Source: https://www.zomato.com/whitelabel
MAJOR SOURCES OF REVENUE
Revenue comes entirely from advertising in most inter
national markets. In India and the UAE, it earns
about 20% of revenue from food ordering, where
restaurants pay commissions for orders through the
Zomato site. Online food ordering contributes
~20% revenue to our overall topline
But advertisement business, which grew by 58% to
$38 million in FY17, still accounted for a lion's share
of revenues as compared to the food-delivery
business, which grew 8 times to $9 million, according
to an earlier blog post by Zomato.

Source: http://timesofindia.indiatimes.com/companies/zomato-plans-to-deliver-on-its-own/articleshow/58903898.cms
EXISTING REVENUE MANAGEMENT
Most of our ad revenue comes from the dining out and nightlife categories.
Of the ~750k orders last month, 80% of the orders were fulfilled by restaurants
themselves (where we don’t do the delivery for them) – we call these Type A orders.
20% of the orders were fulfilled by us, through our last-mile logistics partners – we
call these Type B orders.
REVENUE MODEL
Our AOVs (post all possible ways to consider discounting) are Rs 480 for Type A
orders, and Rs 375 for Type B orders.
Take-rate/Commission/Gross Margin : This is the percentage of the total bill amount
that the restaurant pays us for bringing them the delivery orders through our online
ordering service.
For us, this is averaging out to 8.2% in the most recent month for Type A orders, and
18.2% for Type B orders (which includes an extra 10% for delivery).
Here’s the math for this.
Type A orders, commission – AOV * Take Rate = Rs 480 * 8.2% = ~Rs 40
Type B orders, commission – AOV * Take Rate = Rs 375 * (8.2% + 10%) = ~Rs 68
REVENUE MODEL
Delivery cost : Applicable to us only for Type B orders, this is the cost incurred to deliver a
single order.
We pay Rs 50 to our delivery partners per order on an average (more on that later).
Processing and Support Cost: Processing cost includes the telco data fee we incur when we
automatically transmit a new order over to the restaurant.
Our total processing and support cost for Type A orders adds up to Rs 18.4 per order. For
Type B orders, it adds up to Rs 27.4
Net Contribution Margin
Net contribution margin = (AOV * Take Rate - Delivery Cost - Processing Cost)
This is what contributes towards the overall profitability of the business, and has to, over time,
offset the fixed cost of the business.
 SERVICE PROCESS
Online Food Delivery
Customer: Sends a confirmation text to customer of order placement
Merchant: Sends a notification to restaurant about the order placement
Customer: Mentions the expected delivery time to customer and
provides order status
Merchant: Coordinates with restaurant regarding the order status and
pick-ups
Query Handling: In case of cancellation, coordinates with restaurant to
cancel the order
In case of delay, coordinated with restaurant about expected delivery
time
Customer: Sends a thank you message and asks for feedback

Table Reservations
Merchant: Confirms the table booking for customer
Customer: Sends a confirmation to customer with details
Query Handling: In case of cancellation, coordinates with restaurant
and customer
ONLINE FOOD
ORDER SYSTEM
APPLICATION
1. user places online order from your
website or mobile app
 User enters your website/mobile
app
 Selects favorite dish
 Add items to cart
 Pay and order online
2. you receive instant notification about
the new order
3. user receives confirmation about the
order placed and delivery time
4. you start order processing and food
preparation
 Food preparation
5. you deliver food to user’s address
 Food delivery
THROUGHPUT TIME, CYCLE TIME, THEORETICAL AND
ACTUAL CAPACITY AND CAPACITY UTILIZATION
As much as you’d like to, you can’t promise 30-minute delivery with no-questions-
asked refunds for orders below Rs. 500 – that’s like trying to provide Taj-quality
services at corner-sweet-shop prices.
We recently deployed a preliminary version of a self-learning algorithm that
predicts how long it might take for a restaurant to deliver to a specific location at a
certain hour. When customers in that location are browsing restaurants they can order
from, we show restaurants that will deliver food to them the fastest first. This (and
some other cool tech) brought our average delivery time down to 38 minutes over
three months.

Source: http://blog.zomato.com/post/142067240706/two-million-meals-on-heres-what-weve-learned
MARKETING IMPLICATIONS
Analyzes & brings you more business
 As online ordering solution is a completely automated software, it makes all your business operations more
effective within less time.
 By analyzing your business entirely, it provides you the business insights regarding your visitors, their location,
abandoned cart, etc.
 For our client: With the provided business insights, our client has come across the list of areas where his
business is doing well and where it is not.
Helps in online business promotion
 Promote special offers or discount coupons on integrated social media websites and can attract more
customers towards your online business.
 For our client: As the CRM module provides a complete data about the customers, helps in personalized
promotions
Online Presence increases
 Food ordering with a beautifully designed website or mobile app.
 For our client: As the ordering system builds a stronger online presence for any brand or company, it became
easier for the people to identify our client’s business online, resulting in more sales.
 BOTTLENECKS IN THE PROCESS
80% 20%
Order Only Model Order and Delivery Model

The major part of the business follows an Order Only Model, and the bottlenecks are majorly due to
an absence of control/check on the service and lack of delivery infrastructure, as 52% of the
restaurants do not have home delivery
Limited Cuisines: Reliance on nearby restaurants for the offerings which are generic and limited
Delivery Time: Restaurant owned delivery system and hence no control over the time of delivery
Quality Assurance: 100% reliance on restaurant for the promised quality delivery, as no quality
control measures present
Food Item Availability Real-time Tracking: No real time menu updation on the basis of
availability at the restaurant and hence periodic manual cancellation of orders

71
DEMAND MANAGEMENT STRATEGY
The trade sees regular and periodic
fluctuations. Weekend evenings have
extraordinarily great unit economics. But
the trick of the trade is to make the unit
economics work over an entire
month/week.
 With only 20% of the orders fulfilled by Zomato’s last-mile
logistics partners, there is a huge opportunity with an increased
demand in big cities. Zomato is evaluating the option of fulfilling
deliveries on its own for a small set of restaurants with by
acquiring hyperlocal delivery start-up Runnr.
 Variable Commission Rates for Better Delivery: With a variable
commission rate present for most of the restaurants on Zomato’s
network; the commission rate depends on the delivery experience
for each order as rated by the customer – the better the
experience, the lower the commission and hence more profit for the
restaurant
 Moving Towards Mobile: With the advent of cheaper
smartphones and a wide internet access, aiding in making the
deliveries more predictable, Zomato is focusing mainly on mobile
and improving the user experience
72
DEMAND MANAGEMENT STRATEGY ( SCALING DOWN )
The operations of Online Food Delivery were shut
down in the cities of Lucknow, Kochi, Indore and
Coimbatore due to significantly small size of the
market at present growing with time at a pace slower
then expected. The company hopes to re-launch when
the time is right. In the meanwhile, it will continue to
offer the best content (including scanned menus) to
ensure that foodies are able to find and order great
food

73
 CUSTOMER LIFETIME VALUE (CLV)
Customer Value

Type A Type B Average

Average Order Value (Rs.) 480 375 427.5
Purchase Frequency 2
Customer Value (Rs.) 855

AOV- The average order value (AOV) is the total revenue earned Customer Lifetime Value
during the year/ No. of orders. For Zomato this would mean Revenue
and the orders during a time period would be separate for the Type A Customer's Average Lifespan Customer Value CLV (Rs.)
and Type B customers 1 855 855
Purchase Frequency- This would be the total No. of customers divided
2 855 1710
by the number of Unique Customer. In Zomato’s case 65% of unique
customers order from Zomato once again in the 12 months. We assume 3 855 2565

the purchase frequency to be 2.

SOURCE: HTTP://BLOG.ZOMATO.COM/POST/145352354341/OUR-UNIT-ECONOMICS-FOR-FOOD-DELIVERY-IN-INDIA SOURCE: HTTPS://BLOG.SMILE.IO/EASY-WAY-TO-CALCULATE-AND-INCREASE-CUSTOMER-LIFETIME-VALUE

 FACTORS WHICH WILL IMPACT THE CLV AND
HENCE STRATEGIES TO INCREASE
The higher the delivery by the restaurant on their own more the CLV
CLV
Increase in the Average order Value (AOV) for Type A customers and in Type B customer for
high-value restaurants that don’t deliver food on their own would be targeted through a
service Zomato Valet
Services Like Zomato Treats led to an increase in the purchase frequency which directly
impacts CLV
Loyalty cards which can be used to increase the customer lifespan

SOURCE: HTTP://WWW.THEHINDUBUSINESSLINE.COM/INFO-TECH/DOING-FOOD-DELIVERY-ALONE-IS-NOT-SUSTAINABLE-ZOMATO-CEO/ARTICLE9791165.ECE
 Flowcharting:
Zomato online Food Ordering Key Activities (Customer’s Perspective)

Choose Restaurant
Feeling Hungry Set Location
on the Cuisine

Change Locality
Set Payment Add items to the
Pay within Location/
Option cart
Same Address
 Blueprinting:
Zomato online Food Ordering Key Activities (Customer’s Perspective)

Choose Restaurant
Feeling Hungry Set Location
on the Cuisine

Physical Evidence
- Customer Reviews Potential Pain Points
- Acceptance Rate from the -Restaurant might have
Restaurants shut down, but Listed
- Delivery Experience
- Zomato Foodie Index
- Nearby Restaurants

Set Payment Change Locality Add items to the

Pay within Location/
Option cart
Same Address
Potential Pain Points
-Merchant phone Number to confirm Physical Evidence
order/ Assistance - Confirmation of the order
-Voucher Not valid through OTP Generation
 Employee roles in the service delivery process being a Low-contact service
In the value creation for the customer there are three entities which create value being Zomato, the merchant and
The Hyperlocal Delivery Partner, which for Zomato is third party ( Pickingo, Grab, Delhivery etc.)

Merchant Assistance Delivery Personnel Zomato

• Confirmation with the • Coordinate pick up for • Keep the IT systems
restaurant of the Partner Restaurant up and running
placed order • Pick up food from • The call support has
• Coordination with the Partner Restaurant been changed to
restaurant to change • Coordinate delivery chat with Zomato
the order Location with customer Support which looks
• Call the restaurant • Deliver Food to the into the missing
when the food is customer order, order status,
taking too long to be • Accept payment Billing error and
delivered through a mode Refund status
convenient to customer
 Customer Participation in the Service Processes

Factors Unique to Zomato

- Non standardization of service
Products
- The level of participation
which the customer goes
through
- Partial Co-production of the
service
- Hi-Tech in nature
- The customer input is intangible
and the output is tangible
which is delivery of food which
is service processing involving
objects
Moderate level of Customer
Participation
- Customers inputs required to
assist Zomato in creating and
delivering the order
- Provision of information an key
requirement by Zomato
- No physical presence needed

Place
Core Service Supplementary Value- enhancing Service
Service Distribution
Only Via Electronic
Channels for search,
discovery, table
reservation and
online Food ordering
Marketing strategy for the firm
Price
• Zomato Gold which currently
operates in UAE and Portugal
which is a subscription based
service
• Zomato Treats – For Rs. 299
a year the subscribers get a
dessert free on every order
• Zomato works as Self serving
Service Distribution technology to get information,
Only via the physical do the payment and
channel which is reservation. The core product
partner restaurant which is the food is paid for
Where the gold card to the restaurants on which
is shown Zomato earns a 10%
commission on each order.
 For Consumer For Business
- Table Reservation - Zomato Book- helps in
- Discovery and search Analytics, CRM, Smart
Platform Primary reason table management,
people come to the Reservation management,
Zomato platform staff management and
- Online Food Delivery online reservation
- Zomato Order- app to
streamline restaurant
takeout’s and delivery
Products orders, access to logistics
partners, online payments
- Zomato Trace- Manage
and analyze the food
delivery business via live
tracking, computing
incentives on metrics,
actionable insights

SOURCE: HTTPS://WWW.ZOMATO.COM/BUSINESS?REF=NEW_HEADER_TOP_NAV
 Digital Marketing
• Zomato blog aimed at
educating and connecting
with loyal audience of
Zomato.
• Zomato Business blog
aimed at restaurants
• Zomato Community Blog
for building a food
community written by users
• Zomato Engineering
Stories and learnings from
the engineering, design and
Product teams
• Active Facebook page
which shares blog posts
and quirky photos on food
SOURCE: HTTP://WWW.AFAQS.COM/NEWS/STORY/47486_STOP-DIALLING-ORDER-ONLINE-SAYS-ZOMATO-IN-QUIRKY-PRINT-AD SOURCE: HTTPS://ZOMATO.RECRUITEE.COM/O/INSIDE-SALES--GOLD
Advertising
Print to promote Zomato order on
national Dailies with Full page ad
such Hindustan Times and The Times
of India
Broadcast two television campaigns
urging consumers to order food
online and enjoy family time
Integrated Marketing
Communication
Co Branding Opportunities
Restaurant partners having the
Direct Selling option of Zomato pasted on doors
A inside-sales role, would be and pamphlets
pitching Zomato Gold to users over Delivery Boxes from the restaurant
the phone/chat and close deals partners cobranded along with the
restaurant branding
SOURCE: HTTPS://ENGINEERING.ZOMATO.COM/TAGGED/DESIGN
Three Long-term benefit of unbundling Zomato Order App from Zomato App

SOURCE: HTTP://BLOG.ZOMATO.COM/POST/118506345621/INTRODUCING-ZOMATO-ORDER
Physical Environment or Servicescape
In the absence of a tangible elements
when using the self serving technology,
Zomato focusses a lot of the visual and
interaction design of its application
which begins from design thinking or the Some variables that would play into a user’s context of use for Zomato
Human centered design which solves the
unmet and latent needs
Process
• Moving from restaurant directory to
restaurant directory- collections— The processes to follow came range from:
thematic, mood-based curated lists “How might we avoid choice overload when selecting items from a
of restaurants, and a powerful menu? What if we add photos to the menu? Should delivery times be
discovery feature ranges instead of fixed numbers? Could we make the payment method
• Happy Hours collection should selection effortless?”
surface at a time that the user is
looking for nightlife, and Sunday
Brunches should appear on a
weekend. Pocket-friendly bars
should surface for a different user
than the ones for whom we surface
Luxury Dining
SOURCE: HTTPS://ENGINEERING.ZOMATO.COM/PRODUCT-BEFORE-PIXELS-A-PRODUCT-THINKING-WORKSHOP-FOR-DESIGNERS-C30ECA4DA790
Thank You

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