Big rise in business positive pandemic takeaway for food delivery apps

By: |
February 21, 2021 5:45 AM

Zomato, for instance, claims to have clocked nearly 60% higher GMV year-on-year this New Year’s eve. It translates into a GMV of Rs 75 crore in a single day.

More people became compatible with the idea of placing online food orders, which otherwise was largely popular among corporates and millennials.More people became compatible with the idea of placing online food orders, which otherwise was largely popular among corporates and millennials.

Online food delivery is one of the few businesses that has benefited from the Covid-led disruption. Devoid of recreational activities and restricted within the confines of their homes, consumers gorged on their way to happiness. More people became compatible with the idea of placing online food orders, which otherwise was largely popular among corporates and millennials.

Not surprisingly, analysts are betting on the sector. The segment that has about 15 million transacting users at present is estimated to widen its customer base to as many as 80 million going ahead, analysts at Kotak Institutional Equities said in a recent report. The frequency of placing orders is also expected to go up to nearly five times a month from about three to four times currently. Nearly 110-120 million Indians shop online, while over 300 million people use the internet for messaging and watching videos. “We believe the immediate opportunity for food delivery companies is the 110-120 million online shopper base; these customers are already aware of transacting online and making online payments,” the analysts said.

A steady increase in the number of users and order frequencies would mean that there is a significant opportunity for the industry GMV (gross merchandise value) to grow manifold. From an estimated $3 billion in FY20, the industry GMV is expected to increase to $9 billion in FY25 and further to $27 billion by FY2030, the analysts said.

Zomato, for instance, claims to have clocked nearly 60% higher GMV year-on-year this New Year’s eve. It translates into a GMV of Rs 75 crore in a single day. “If we had unconstrained supply, we could have hit Rs 100 crore of GMV,” founder & CEO Deepinder Goyal had said. Peak orders per minute rate (OPM) for Zomato and Swiggy touched over 4,000 and 5,000, respectively, on New Year’s eve.

In an interview with local media in November last year, Vivek Sunder, chief operating officer at Swiggy, had said that a large customer base has significantly reduced the need to spend heavily on discounting to drive more users. That, Sunder said, “is an important lever of improving our unit economics”.

For one, Covid has improved take rates and revenues per order. Also, higher order densities and lower delivery personnel expenses drove down delivery costs, analysts said in the report. “Further, competitive intensity is far lower than earlier with weaker players like Foodpanda folding up, UberEats being acquired by Zomato and Scootsy being acquired by Swiggy,” they added. In a report published in July last year, Zomato had said it estimated its monthly burn rate (in July 2020) to “land under $1 million”.

Driven by a rising user base, investors heavily backed Zomato and Swiggy last year. Zomato closed a $660-million financing round backed by 10 new investors at a post-money valuation of $3.9 billion, while rival Swiggy raked in about $156 million in two tranches.

“I strongly believe that Indian startups do not need to look out to other countries for growth. There is a tremendous amount of market depth in India,” Goyal had said.

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