Introduction

In this post, we delve deep into the successful business model of Zomato, a leading player in the Indian food delivery space. We shed light on its multiple business segments, key research points from the company's May 2024 concall, and the immense growth potential.

Zomato's Business Model

Zomato operates in four main business segments:

1. Food Delivery: This segment makes up 63% of the 'Gross Order Value' (GOV) and is the primary revenue generator for the company.
2. Quick Commerce (Blinkit): Also known as 'Blinkit', this service ensures delivery of goods within 10-15 minutes.
3. Dining Out: This category includes services like table reservation and event ticketing.
4. B2B supplies (Hyperpure): Primarily, sourcing raw materials for hotels.

Recovery and Growth: Food Delivery Business

Zomato saw a resurgence in its food delivery business thanks to a few strategic moves. Some of these include:

• Withdrawing its operations from small, underperforming cities.
• Downsizing the workforce.
• Implementing a platform fee per order, which currently stands at INR 5.

Additionally, Zomato's restaurant partners increased to 247,000, which points towards an upward growth trajectory for the company. Future growth, however, might depend on its diversification into the 'Quick Commerce' segment.

Venturing into Quick Commerce: Blinkit

Zomato is betting big on quick commerce through 'Blinkit'. Also facing stiff competition from similar services like Zepto, Swiggy Instamart, and BigBasket, Zomato managed to stay a step ahead by offering quicker delivery and expanding its product range. Its 'dark store' model – warehousing frequently ordered items in densely populated areas – has facilitated super-fast delivery, driving the success of Blinkit.

Going Out Business and B2B Supplies

Zomato's 'Going Out' business includes table reservations and event ticketing. Zomato also recently hinted at exploring the idea of acquiring the movie business from PayTM. The last segment, the B2B hyperpure business focuses on supplying raw materials to food outlets.

Financial Overview

While food delivery primarily drives Zomato's revenue growth, the management believes the quick commerce segment could soon overtake food delivery. The growth rate of various revenue segments is quite promising: food delivery at 6%, quick commerce at 28%, 'Going Out' at 26%, and B2B at 13%.

Competitive Edge and Future Plans

Zomato appears to have a competitive edge, especially in quick commerce, outdoing its competitors by 50%. Besides, their 'dark store' model, anticipated expansion plan, the integration of various services, and the potential exploration of franchise model inspire confidence in the company's future growth.

Drawbacks and Uncertainties

Despite the impressive growth trajectory, potential drawbacks cannot be ignored. Apart from facing fierce competition, the possibility of losing the business advantage looms large. A strategy focused on short-term profit, further, may not ensure sustainability in the long run.

Conclusion

Zomato, with its unique business model, is taking significant strides in the food delivery and quick commerce market. However, the high competitive intensity in the space and the ever-evolving consumer preferences pose challenges. Therefore, while there seems to be a promising growth story, potential investors should proceed with caution.