Business Strategy Hub

Zomato SWOT Analysis (2024)

Company: Zomato Ltd
CEO:
Deepinder Goyal
Founders:
Deepinder Goyal & Pankaj Chaddah
Year founded:
2008
Headquarter:
Gurgaon, Haryana, India
Employees (Mar 2022):
3,517
Type:
Public
Ticker Symbol:
ZOMATO
Annual Revenue (Mar 2022):
Rs 46.87 billion
Profit | Net income (Mar 2022):
Rs 12.23 billion

Products & Services: Food delivery  | Restaurant aggregator | Restaurant reviews and ratings | One-stop procurement solution | Table reservation | Delivery of fresh supplies to restaurant partners
Competitors:
Swiggy | DoorDash | GrubHub | Postmates | ChowNow | Slice | Uber Eats | Food Panda | Deliveroo

Did you know? In July 2021, Zomato’s Rs 9,375 crore (approximately $12 Billion) IPO at Rs 76 per share was one of the biggest by a startup in India.

Zomato Strengths

1. World’s leading food delivery services site

Zomato is one of the largest restaurant search websites in the world. Its food ordering and delivery services cover more than 1,000 cities and have 14.7 million monthly average transacting customers.

Additionally, Zomato has partnerships with 180,000 restaurants and 285,000 delivery partners.

2. Market dominance in India

The Indian food delivery services market is a duopoly market, with Zomato and its rival Swiggy as the two absolute market leaders.

The competitive landscape used to include Zomato and Swiggy holding 50% each of the market share, but this has changed in recent years. Recently, Zomato expanded its market share and stands at around 55% currently.

3. Rapid growth

Zomato continues to enjoy growth in terms of revenue and operations. In FY2022, the total value of all food deliveries ordered through Zomato’s online platform jumped to Rs 213 billion, registering a 125% growth year-on-year.

The number of orders (535.2 million) and monthly transacting customers (14.7 million) have also grown by 124% and 116%, respectively, compared with last year.

4. Dynamic marketing strategies

Zomato’s aggressive marketing channel mix across various social platforms has helped it to reach out to customers seamlessly across devices, keeping it ahead of the competition.

Even though Zomato is an online platform, it does both digital marketing and offline advertising. This strategy has allowed Zomato to strengthen its presence and attract a huge amount of followers.

The Rs 1.3 billion increment in Zomato’s digital marketing spend in FY 2022 enabled the company to acquire 25 million new customers compared to 10 million new customers in FY 2021.

5. Innovation in digital payments

Innovation is at the core of Zomato’s operations. Zomato has developed innovative products like its digital payments service to take advantage of the rapidly expanding digital payments space.

The digital payments subsidiary of Zomato, Zomato Payments, offers services including e-wallets, virtual payment systems, mobile wallets, and cash cards to consumers. Zomato Payments will enable the company to provide better services for customers.

6. Ability to raise capital

The food aggregator has a knack for successfully raising capital to run its operations. In 2020, Zomato raised $62 million from Temasek and received $52 million in funding from Kora Investments.

The following year it raised $250 million from five investors, including Tiger Global Management, followed by a successful IPO in July 2021 valued at $12 billion.

7. Global presence

Although Zomato is headquartered in India, it has an international presence in countries including Australia, Netherlands, USA, Turkey, and some Southeast Asian countries.

8. Strategic acquisitions

Zomato has made shrewd acquisitions that have helped it dominate the food ordering segment. In 2020, it acquired its rival; Uber Eats India, for Rs 2,485 crores in the form of a 10% stake in Zomato’s equity.

Later, in 2022, Zomato acquired Blinkit for Rs 4,447 crores in an all-stock deal. The multinational restaurant aggregator has also acquired minority stakes in startups like Grofers, Curefit, Shiprocket, and Magicpin.

Zomato Weaknesses

1. Loss-making status

Zomato, and food delivery companies in general, are viewed by analysts as loss-making ventures with small margins. These factors are likely to discourage future investments in the sector.

In FY22, Zomato’s net loss widened by 50% to Rs 12.23 billion, further continuing the negative trend in its fortunes.

2. Poor business decisions

Zomato has made wrong business decisions in the past, such as its unsustainable offer of discount programs at dine-in restaurants. The program led to 1,200 restaurants delisting themselves from the food aggregator’s online food delivery system in a standoff.

Zomato’s foray into the alcohol and groceries delivery segment also failed in 2020, as the venture proved to be unscalable.

3. Management/ownership restructuring

In April 2020, the startup had to shuffle its top management as one of the co-founders, Pankaj Chaddah quit, leaving the company in a vulnerable position.

Zomato Opportunities

1. Potential market growth

The food delivery business is estimated to be worth $110 billion by 2025, while India’s food delivery market is expected to grow at 28.13% CAGR for the next four years. Analysts believe that food tech giants like Zomato can exploit this vast potential.

2. Partnerships & acquisitions

Investments and acquisitions still represent the best way for restaurant aggregators to grow in the market and explore new business opportunities.

To this end, Zomato is spending more than $1.2 billion for investments and acquisitions to strengthen its position in the food delivery market space.

3. Product diversification

Venturing into new product lines like nutraceuticals presents a great opportunity for Zomato to exploit the increasing popularity of this alternative medicine segment.

Currently, India has 150 million consumers of nutraceutical products, a number which has grown from 12% of the population to a high of 25% since 2016.

Zomato Threats

1. Client shrinking margins

Food establishments using Zomato’s platform continue to shoulder the burden of increasing online delivery service costs.

This poses the threat of restaurants shying away from the food aggregator if their margins become unsustainable.

2. Rising energy costs

Zomato is also a victim of inflation and rising costs of energy. An increase in fuel prices has pushed up Zomato’s delivery cost per order, eating further into the food tech’s fine margins and increasing the net loss.

3. Security breaches

The threat of hacking into Zomato’s system and gaining access to information on its clients remains real. The security breaches that happened in 2015 and 2017 resulted in 17 million user data being stolen.

4. Social & Governance risks

Zomato has seen its fair share of controversies that have undermined its public image. In October 2021, for example, #Reject Zomato trended on Twitter after a company chat support representative appeared to discriminate against a non-Hindu customer.

5. Withdrawal of major shareholder

In August 2022, Uber Technologies Inc. sold off its stake of 612 million shares in Zomato, and another major shareholder Tiger Global sold 185 million shares.

The sale of shares shows low investors’ confidence in the company’s future, leaving the online food-delivery startup in a weaker financial position.

 References & more information

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

Kevin Johnson

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