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So far a restaurant-search entity, Zomato is now entering the online food-ordering space. As a late entrant, it has decided on a commission much lower than the segment average. It is asking for 7% of each order size, compared to 15-20% charged by rivals such as Foodpanda and TinyOwl.
The Rocket Internet-backed Foodpanda recently acquired JustEat and the Pune-based TastyKhana to aggressively expand in the Indian market.
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Zomato also has a clause that works on exclusivity in its tie-ups. If an outlet chooses to take orders from its rivals, instead of going exclusive with it, its commission might go up, though it will still be lower than the sector average, confirms a spokesperson.
Zomato is currently piloting its online ordering. It is expected to go live in mid-April, 2015. The pilot is running in Bengaluru, Delhi and Mumbai. "The product should hit the market with around 2,000 restaurant partners. Over the next few months, we are aiming to offer this feature with a little over 10,000 restaurant partners in India," says Deepinder Goyal, founder and chief executive officer.
Given the extensive listing of restaurants Zomato already has, 2,000 partners appears to be a modest number.
TinyOwl, less than a year old, has a little over 4,000 restaurants, though serving only Mumbai. The location-based mobile app was founded by a group of IIT Bombay alumni, including the co-founder Harshvardhan Mandad.
While Foodpanda services 160 cities with 5,700 restaurant partners, JustEat covers 85 cities and has 3,000 restaurants, and TastyKhana 200 cities with 11,600 restaurant partners. Foodpanda is expected to merge the two acquired brands with itself going forward.
At present, most of the companies get 15-20% of the total order size placed via their apps. The average ticket via the apps is Rs 300-400.
For Zomato, this will be an additional revenue stream. The company garners maximum revenue from advertisements. Zomato is looking at doubling its revenue, in the next financial year, with the new revenue model.
The company wants to start processing around 40,000 orders a day in the near term. As it has 400,000 people who visit the India section on its site every day, this should not be too hard to achieve, says the company, seen as one of the hottest start-ups from India.
Zomato will also launch the service abroad in a few months, starting with Dubai and followed by Jakarta, Manila and Sydney.
"Our rate slabs are based on consumer-based delivery ratings and we will stick to those. Our focus is on providing the best experience to our user base, which in turn will drive order volumes for our merchant partners,'' says Goyal.
The company does not believe in frequent discounting to drive orders, as it leads to an inconsistent and unpredictable order volume, says the CEO. "We're committed to building a sustainable, long-term business."
While the Indian online food aggregator space is witnessing significant action, a key area of concern is ensuring companies in the segment get their revenue share on each order, say experts. Incorporating a seamless technology is another feature that these companies need to get right.
Zomato also plans to install iPads at the partner restaurants for a smooth food-ordering service. These would be made available for an insurance (for theft/damage) cost of at least Rs 20,000 each.
For companies in the food-ordering space, the acquisition cost of a customer is lower than in other segments of e-commerce.
The average cost for a customer acquisition is about Rs 100 in online food-ordering and the number multiplies 10-20 times in pure e-commerce areas such as fashion and consumer electronics.
