Zomato Business Model Explained
“Unlocking happiness by discovering more places to eat around you!”
The brand that envisages shaping the future of food. The brand aims to change what people eat by improving how they eat. The brand that was earlier famously called Foodiebay because it is solace for those who are foodie to the core. The brand realizes that food has a distinguished existence and an important connotation with happiness in people’s lives, and it continually strives to package and parcel happiness to people. That brand is Zomato. From tiniest eateries to swankiest restaurants, Zomato brings all to you. Zomato brings convenience and gratification to you! We have explained the Zomato business model to make it simpler for you!
Genesis of Zomato
The seed of Zomato was sown approximately 12 years ago. Back in 2008, the thought was conceived in the minds of three passionate foodies who despised waiting for so long in colossal queues. It was the need to have access to all restaurant menus digitally at one place and the passion to make it available for all that gave birth to Zomato. That idea was their baby, and now that baby has grown into a vision that drives a team of 5000+ people every day.
Zomato wasn’t Zomato from the beginning. It started as ‘Foodiebay,’ which was an online restaurant directory. CEO Deepender Goyal felt the need to change this name as it resembled ‘eBay’ and he visioned to create a unique identity of own. Hence the christening ceremonies happened, and since then, it’s known as Zomato. From a home project, it has lengthened into a large food aggregator that operates globally. With its footprint in almost 24 countries and over 10000 cities, it is constantly working towards its vision of better food for more people. In addition to discovery and delivery, Zomato has also entered various segments like restaurant reservations, loyalty programs, and live events. Zomato not only functions as the connecting link between food and people in every context, instead it sets an example by cooperating and working with restaurants closely to enable a sustainable ecosystem.
The success of Zomato lies in its robust Business Model. Essentially Zomato is an application whose business model encircles the provision of food delivery services, provision of information, user reviews, and menus of partner restaurants. Zomato stands as the pioneer for other online food-based applications. Following are the critical elements of Zomato’s business model:
- Customer Segments: The customer segment of Zomato has been divided into three parts:
- Local restaurants: Zomato enables restaurants to make themselves visible to their target audience
- Users: Zomato is dedicated to users who aspire to locate restaurants or specific cuisines nearby. Zomato is the panacea for users who are fond of home delivery
- Reviewers: They are content contributors of Zomato. They actively review food and places and provide relevant information to the users in textual and graphical form
- Zomato Provisions: Zomato acts as the connecting bridge between customers and partner restaurants. Zomato has crafted a well-designed pricing model for their only delivery services. The inclusion of Zomato Gold & Piggybank has improved the quality of services provided by Zomato
- Alliances of Zomato: Recent partnerships with various big names like Uber Taxi, Visa, PayPal has enhanced the business model of Zomato. The partners have aided Zomato in various aspects, for instance, finding a location to set-up, hiring and other procedures, work placements, market research, handling operational, accounting, political and legal issues, etc.
Value propositions of Zomato
Zomato is immensely loved for the way it works. Zomato is premised on the QAAA model, i.e., it promises and delivers Quality, Accessibility, Affordability, and Assortment to its customers and partners. Following are the value propositions of Zomato, which makes Zomato unique and admirable:
- Improving food quality: Zomato is wholly dedicated to nurturing a neutral platform. It consistently aids food establishments in maintaining high standards through Hyper pure. Hyperpure is an innovative initiative by Zomato to bring fresh, squeaky clean, and high-quality ingredients and kitchen supplies to its partner restaurants. Food Hygiene rating is the most yearned for a symbol of quality well known among its partner restaurants.
- Boosting accessibility for customers: Zomato delivery is increasing since its inception and expanding its reach to more and more cities. They are vigorously growing their services. Now they offer table reservations, perform corporate catering, and feeding India.
- Ensuring affordability: The success of Zomato gold speaks volumes for Zomato’s efficiency in providing an array of exciting choices. Zomato continually strives and leaves no stone unturned in delivering the best. They ensure affordability without compromising on their profits.
- Aid in the assortment: Zomato believes in enabling its customers in unearthing band new tastes and experiences transcending geographical borders. They present the best information in the most legible manner for their customers and help them in making an informed choice.
Key activities of Zomato
Following are the prime activities undertaken by Zomato:
- Managing network effects: Zomato is the linking chain between restaurants and customers
- Managing to advertise: Zomato holds a reservoir of the user database, which it further uses for advertisement. The company posts advertisements for various restaurants, thereby generating handsome revenue for itself.
- Enhancing customer experience: Zomato undertakes myriads of activities to continue to improve customer experience. It keeps its features updated in synch with emerging trends.
- Keeping up the brand image: Zomato tries to hold its dignity as the provider of information for the foodie community by ensuring the flow of authentic information that helps its customer to address two essential questions, i.e., what to eat and where to eat.
- Online food delivery and subscription: Initiated for food discovery solutions, Zomato ventured into the food delivery segment as well and introduced a subscription feature later on
- Consultant for partners: Zomato holds a massive repository of user databases and uses various analytical tools to unearth vital pieces of information. That becomes the food for customized consultancy services provided to partner restaurants and eateries.
- Zomato Whitelabel: Zomato also helps restaurants in developing their own robust app with the aid of a platform known as plug and play.
Revenue streams for Zomato
- Commission on Delivery services: These commissions formed about 75% of the total revenue of Zomato for FY2019. This amounted to $155M, which was four times what they made previously.
- Zomato Gold: This is a freemium model based idea. The concept aims at providing premium services to subscribers. This system helps the customer in enjoying complimentary food and beverage services offered they have gold memberships. This service alone generated a whopping $49M in FY19 and $30M in FY20.
- Ticket sales: The ticket sales for various events held in restaurants in partnership with Zomato generate a colossal revenue for Zomato in the disguise of commissions. Zomato also charges for the consultation services provided to their partners.
- Promotions: Zomato continually engages in the promotion of various restaurants. Partners get higher exposure and visibility via banner promotions, and they are charged by Zomato for the same.
Analysis of Zomato Revenue
A big share of 72% of total revenue comes from restaurant advertising and marketing. Approximately 12% of the revenue comes from ticket sales. Even advertising contributes about 4% of the total revenue. 3% and 2% comes from consulting and food delivery services, respectively. Zomato Gold and other analytical services contribute around 7% to the total sum of revenue.
Top-notch database, dedicated employees, talented community of content contributors and reviewers, the aura of the Zomato brand, and huge pipeline of funding partners including famous investors like Ant Financial, Sequoia Capital, Info Edge etc; these are the key resources that enable Zomato to stand tall in the food industry.
What’s in the future for the food industry & Zomato?
Zomato recently published Mid-COVID Report for India. In their report, they shared this finding that the Food delivery sector has recovered with some regional flavors to it and in fact, grown beyond pre-COVID levels in myriads of large pockets of the country, with some affluent residential areas being the forerunners in this recovery. Due to the advent of lockdown and everything moving back at the home trend, many premium restaurants are being receptive to the idea of online delivery, and that is attracting a lot of affluent customers. In fact, during the lockdown, it was observed that customers started to rely more on online deliveries. As people are indulging in taking up more quality time with their families and loved ones, group ordering is becoming a frequent reality. Ongoing IPL and the festive season has bolstered the growth in the food delivery sector. Hence good times are ahead for Zomato.
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