Zomato on Friday, published its Mid-COVD 19 performance report, and the numbers look encouraging fro the food delivery upstart. Zomato saw its revenues doubling from the past year to $394 million in FY20. These numbers were $192 million last year, signalling an impressive jump.
But that does not take away the fact, that Zomato, being a part of the resturant industry, was badly hit due to COVID-19 pandemic. At the beginning of the June quarter, when the lockdowns due to coronavirus were still partially in place, Zomato faced a loss of $12 million and collected a revenue of just $41 million. This was primarily due to restaurants being shut down and customers not showing interest in ordering food due to safety and hygiene concerns.
In the Indian market, the average cost of an order comes out to be comparatively low due to which many of the food delivery businesses find it difficult to be profitable. Zomato, as well as its competitors like Swiggy, has been offering heavy discounts and deals to attract customers as part of their market capture and growth strategy. This additional discount has considerably reduced the net operating margin.
With this in mind, Zomato today said that in order to become profitable, it will cut down such marketing spend, primarily those around discounts. As a result of the same, Zomato’s per delivery profit jumped to Rs 27 in Q1 FY21 due to lower delivery and advertising costs. The figure is impressive, considering Zomato was earlier losing Rs 47 per order in Q1 FY20.
On a more positive note, With the removal of lockdown, the number of orders for Zomato has increased due to which, as of July, the company’s food delivery value has recovered to that of 60% of pre-COVID levels. It also expects to make a complete recovery over the next 3-6 months. More importantly, Zomato has reinstated its employee’s original salaries which were reduced as an initial reaction to the COVID crisis.
India performance also bettered for Zomato due to its Uber Eats acquisition. The company says this acquisition helped it get to the Numero Uno position in the Indian food delivery market. It adds, “The transition of users and merchants from Uber Eats India to Zomato was swift, and so well coordinated by both the teams that we were able to transfer and retain 97% of the combined GMV on the Zomato app.”
“While COVID-19 has impacted the size of our business, it has accelerated our journey to profitability. In terms of the size of the business, COVID-19 has set us back by a year or so – but a year is only a small blip when you are building a company for the next 100 years,” said Deepinder Goyal, Founder & CEO of Zomato.