In more than 400 cities across India where Zomato operates, when you ask someone who has ordered food to name the app or website they use, the answer is Zomato. While launching new cities is hard work, it is extremely rewarding in multiple ways.
Today, we are present in 556 Indian cities and towns. In more than 400 of these, we have virtually gone door-to-door helping users understand what food delivery means and how they can use the Zomato app for their family. Our delivery partners have also been on-the-ground moving the food delivery experience a step further each day.
The response that we have seen from the so called “Tier 2-4” cities in India has been a pleasant surprise for us. I want to present the Zomato story to you – what we saw in the last few months of frenetic expansion of our food delivery service to the real India. The India where most of us come from – no matter which city we live in now.
I met someone recently; someone I respect for his views on markets and companies. He told me that it is companies, not countries, that deliver returns in emerging markets. I am going to go a step further, and say that a slow economy (if at all it is slow) is the best time to innovate, create irreplaceable value for customers, and get the money exchanging hands again.
Here’s what we saw in the Real India –
- Trivandrum (Kerala) became our 50th city in November of 2018 and before the end of 2018, Jamnagar (Gujarat) became our 100th city. By the summer of 2019, we reached our 200th city (Solan, Himachal). In June of 2019, we reached another milestone with Jalpaiguri (West Bengal) becoming our 300th city. A month later, we had already established our flag in our 400th city – Chittoor (Andhra Pradesh), quickly followed by our 500th city in Leh. Apart from being the first to introduce large scale food delivery in NE India, we are also uninterruptedly active in 10 cities (Guwahati, Nagaon, Jorhat, Agartala, Silchar, Dibrugarh, Tezpur, Shillong, Tinsukia and Aizawl) in the region.
- All these cities (and counting) prove – more than anything else – India’s growing appetite for services which add tangible values to people’s lives.
- Tier 3 and 4 cities now contribute 35% of the monthly order volume. These cities are relatively small but are growing at a frenetic pace. A majority of the launches across the smaller cities reached the initial 1000-orders-a-day milestone within a few weeks, if not days.
- There are no delivery zones in most of these towns – we deliver from any restaurant to anywhere in these towns.
- Delivery times are 3 minutes less than the larger cities – most of it because of lack of traffic.
- Out of our committed delivery partner network in non-metro cities, 20% are on bicycles. This is in tune with our commitment to generating employment as well as addressing environmental concerns.
- Ability to hire in these markets is high. Operating costs are lower. CACs (Customer Acquisition Cost) are negligible.
- While average order value is lower in non-metro cities by 20%, the cost of delivery is lower by 50% making the economics superior as compared to the metro cities. By all measures, our delivery business economics in non-metro cities is superior to metro cities.
- This is all to say that while we understand that the delivery business across India is a long game, the development and growth of these smaller cities belie popular stereotypes about these cities.
- Zomato is a household name today and not just in the larger cities but also in the most obscure geographies in India. People from these places identify food delivery with the colour red. So much so, that someone in Punjab also made a very catchy song about Zomato. Spoiler alert – the song is really good. (Also, on the record, we have nothing to do with the creation of this song – we just stumbled across this ourselves last night).
Areas of growth –
The smaller diameters in the non-metro cities allow for greater orders per restaurant. Meituan, a delivery app in China services 22 million orders a day from 5 million restaurants. A rough average calculation amounts to 4.4 orders per restaurant per day. In India, on the other hand, the capacity utilization is much more aggressive – Zomato delivers 1.3 m orders a day from 150k restaurants across India at more than 10 orders per restaurant per day.
This underlines the huge delivery opportunity of cloud kitchens and its ability to service users heavily across tight geographies in a planned manner. We are committed to developing cloud kitchens across these geographies to bridge the supply gap. In the same breath, I want to re-emphasise that we will never compete with our restaurateur partners – we will only build the kitchens – but they will be operated by restaurant brands. Our kitchens are operational in 50 cities across India, with 110 kitchen hubs (either completed or under construction). In total, there are 663 kitchen units and kiosks.
Over the next few years, we estimate our food delivery business to grow to numbers we would be labelled as stupid for saying out loud. We think there are about 200m people in India who will order food from Zomato about 5 times a month, with the top 20m cohort amongst these ordering more than once a day, every day.
These 200m people (and in some time, many more than that) are the real India. And that India is coming of age. Domestic consumption in India is what it is – and it is going to grow as it is. However, India is a market which is unique – here, companies that innovate and adapt will earn the right to serve the millions of India. The market won’t flock to any product or a service just because.