Having onboarded more than 25,000 restaurants in Bengaluru within months of its official launch in March, Rapido’s food delivery platform Ownly plans to expand to a few more cities next quarter before eventually going pan-India. In an interview with Anees Hussain, Rapido Co-founder Aravind Sanka talks about Ownly‘s cost structure, its promise of zero platform fee, and the state of Rapido’s core mobility business. Excerpts:
Quick commerce has a floor for cost per order. Do you have one?
We don’t have quick commerce’s fixed costs. About 95% of our costs are variable, nearly 90% of that logistics. Fixed cost per order has a cap, whereas variable costs fall sharply with scale. Meesho showed low average order value (AOV) businesses need logistics costs well below that of competitors to create a market… Our AOV is 60% below incumbents’, yet our cost per order is lower.
Platform fees drove incumbents’ profitability. Is that an option?
We will never charge a platform fee. Our model is built on transparency and trust. We will pass on the major cost — that of delivery — to customers. Platform fees reflect a company’s internal costs, not delivery cost. We can operate very lean.
How long will this waiver of delivery fee last?
Logistics is inefficient at small scale. At larger scale, we will charge a fair distance-based logistics fee. Timing depends on our capital and how competitors react. New platforms must earn trust; we want customer confidence on service levels first.
Restaurants have heard low-commission promises before. Why should they trust yours?
As a late entrant we know others’ mistakes, so we haven’t changed our restaurant value proposition. In mobility we learnt you cannot keep changing promises, because suppliers build their future around your model. If a driver buys an auto on that basis and you change it, his Rs 4-5 lakh investment is wasted. It costs restaurants zero to be online with us, and that won’t change.
You avoided discounts in the pilot but have launched them now. Why?
We promised restaurants we would never force them to fund discounts. You can’t raise the price 3x and offer 75% off. If your value proposition is everyday low prices, it must remain that. These discounts are funded by us, not restaurants, and limited to the first order, sometimes to the second and the third. It is a better use of acquisition budget than (paying to) Meta, since Rapido already gives us a large funnel.
What market share are you targeting?
Market share is not our focus because we are creating a new market; it matters only if you’re taking share from incumbents. Penetration remains low. If the category grows 20% annually, as incumbents have guided, our target is 40%. Even now, our growth hasn’t come at their expense.
Will growth come from new restaurants or existing ones?
All of it can’t come from new restaurants coming to online delivery. First, we want to help existing online restaurants raise their online share from say 25% of business to 30-35%, that is the low-hanging fruit. Second, long-standing restaurants still under 10-20% online are largely the value restaurants…and (many of them) still haven’t leveraged online channel. Lastly, new supply is always a lag. Nobody opens a restaurant because of us today. Once competition reacts and a fourth and fifth players move to affordable, people believe the model will last and open restaurants.
Flipkart is expected to enter the segment at 11% commission. Can such a model work without in-house logistics?
Lower commissions benefit restaurants, so I don’t see why it cannot work. Whether the right answer is zero, 11% or 20% depends on the model. Repeat business depends on service levels. If someone can maintain service on lower commissions, they have a fair chance.
Large quick service restaurants such as KFC and McDonald’s went offline on Ownly. What happened to the Magicpin integration?
We have completely phased it out. In the pilot it helped us onboard quickly, but we realised some challenges needed direct relationships. We have onboarded Burger King, Subway and Taco Bell directly, and expect the remaining 3-4 QSR chains to be onboarded via this route within weeks.
Uber infused about $350 million into India and you raised $240 million in May. Do you expect this to raise competitive intensity?
As market leaders we can choose whether to react. But I don’t expect intensity to return to the level of two or three years ago. It is rational now.
Where does mobility stand on profitability?
We are operationally profitable, though not yet at the Ebitda level. We cover all variable costs. At platform level we remain the largest in orders, users and captains (driver partners).