After around two months of launching its grocery vertical — Zomato Market — amid lockdown, as food delivery took a severe beating with revenues squeezed, Zomato is likely to soon shut it down, a source aware of the development told Financial Express Online. “This perhaps is not working out for them. Hyperlocal delivery, as we know, needs heavy cash burn with very little margin. Also, I don’t think the response to this (grocery business) was the way the company expected,” the source said.
While Zomato Market will “continue to operate and service users who need on-demand delivery of essentials” but with unlock 1.0 relaxations, Zomato will “spend a large proportion of our time making our food delivery service the safest, and the most loved one in town,” a Zomato spokesperson said in a statement.
Days after starting the service, the company had expanded the service to over 80 cities. “Our delivery network in the country is only second to India Post, and we are putting in every effort to make sure that we put it to good use to serve the community,” Deepinder Goyal, Founder and CEO, Zomato had said in a company blog post in April this year. The company’ number of delivery partners has grown from 74,000 in September 2018 to 2.3 lakh in September last year, a tweet by Goyal had said.
Zomato had launched the service to leverage its last-mile delivery workforce to ride the grocery wave and minimize, in whatever way possible, the impact on its core business due to Covid. Its arch-rival Swiggy had also expanded its existing grocery business to over 125 cities to deliver essential goods in partnership with HUL, P&G, Godrej, Dabur, Marico, Vishal Mega Mart, Adani Wilmers, Cipla etc.
Grocery has become the new oxygen for multiple internet ventures to tide over Covid loss. NoBroker, Perpule, Meesho, Snapdeal, ShopClues, Box8, Uber, CountLoot, Rapido, PhonePe etc. were among the startups offering grocery deliveries. India’s digital grocery segment is led by BigBasket, Grofers along while Amazon Pantry and Flipkart Supermart are among others leading the market.
Zomato had laid off 13 per cent workforce – over 500 employees last month to reset its cost base to survive Covid pandemic. “We owe all our colleagues a challenging work environment, but we won’t be able to offer that to nearly 13 per cent of our workforce going forward,” Goyal had said in a note to employees.