Zomato, Swiggy hunger for demand uptick for better delivery
The battle between India’s two large online food delivery companies is fierce. But Zomato Ltd has the upper hand versus peer Swiggy in terms of market share. Prosus, an investor in Swiggy with a 33% stake has revealed some data points for 2022 in its latest annual report. An analysis of the gross merchandise value (GMV) data shows that Zomato has maintained its market share sequentially at about 55% in the second half of 2022. This is despite the absence of Zomato’s loyalty programme for most of this time.
Kotak Institutional Equities’ analysts point out that Zomato’s higher share reflects strong execution and customer stickiness even as there were less discounts on the platform. What is more, with the company launching its loyalty programme Zomato Gold in late January, there is a likelihood of further gains in market share. Having said that, the launch of Zomato Gold did not move the needle much for the company in the March quarter (Q4FY23). This comes on the back of an industry-wide slowdown, which led to Zomato’s GMV falling by 1.7% sequentially. To be sure, moderating demand in the food delivery business is a concern for both companies.
But amid this, the focus on profitability is encouraging. Swiggy has turned adjusted Ebitda positive as of March in the food delivery segment. Here, Zomato achieved breakeven in Q1FY23. It is quite evident that both Zomato and Swiggy have prioritized profitability improvement over market share gains, said analysts at JM Financial Institutional Securities. “This leads us to believe that significant market share shifts are unlikely in the near term,” the broking firm said. Zomato also leads in some other metrics. Analysts note that Swiggy’s loss in 2022 is way ahead of Zomato’s. This comes on the back of increased investments in Swiggy’s quick commerce vertical—Instamart. According to Prosus, investment in Instamart has peaked. “We read this as positive for Zomato’s Blinkit as well, where contribution loss per order has reduced significantly in FY2023,” Kotak analysts said.
While Zomato now has a relatively strong hold on the food delivery market, it is crucial for underlying demand to bounce back. Q1FY24 would see growth in GMV helped by Indian Premier League and summer vacation but sustained momentum is needed even beyond that. Further, Zomato’s progress towards meeting its goal of turning positive at consolidated adjusted Ebitda and profit after tax level in the next four quarters would be keenly watched. For now, investors seem optimistic. After all, Zomato’s shares have risen by over 26% in 2023 so far.
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Updated: 28 Jun 2023, 10:15 PM IST
