HospitalityBiz India
Hotels FoodService Operations Ministry Associations Equipment Editorial HR Technology Technology Advisory Board Community
Follow us on Facebook Follow us on Twitter instagram
    Home > Technology

Food delivery firms will fight for a seat at the table

Friday, December 22, 2017, 12:30 Hrs  [IST]

As per a report in The Economic Times, India’s food-technology space is all set to make a comeback next year, drawing the curtains on a year that has seen consolidations, new entrants and a massive clean-up exercise by incumbents as they jostle for the top spot in the delivery market. With Ola’s entry into the high frequency market, the swords are now drawn in what has become a 5-way battle between top guns including Swiggy and Zomato along with Ola-Foodpanda, UberEats and Google Areo, all looking to claim the top spot. The rivalry between food aggregators has escalated, not just with discounting to woo customers similar to what happened 2014-2015, but also commission cuts which will become the preferred platform for restaurants, a move that Zomato has already begun and one that’s likely to decide who will be the last man standing.

“Discounting wars are likely to return, given the increase in competition but one may not see them coming back immediately. However, there may be a tendency to get more restaurants on board through cuts in commission charges and that could probably swing the balance,” said a senior executive at a cloud kitchen firm. But with capital coming back, it remains to be seen if firms will be able to maintain unit economics as larger strategic look for a bigger bite of the food delivery market. The sector which had seen its worst investment dip in 2016 managed to crawl through 2017 with a paltry 8% rise in investments to USD 126 million, shows data from Tracxn.

About two thirds of this capital was raised by Swiggy. Investors’ caution in the sector has meant that FY17 has been a year of clean-up for food aggregators, with significant growth in revenues, buoyed by a swell in order volumes, while limiting the pace of losses; even shrinking the figure in some cases. While both Zomato and Foodpanda India cut their losses, Swiggy too saw a milder 50% increase in losses, compared with a 65 times increase during the previous year. Swiggy claims the expansion in losses is congruent with a 4-fold increase in order volumes during FY17 even as it has managed a 35% reduction in its delivery costs. Industry experts and analysts maintain that a large part of the move towards profitability has been made possible due to an increase in commission rates, additional delivery fees at different peak times as also better utilisation of delivery fleet thereby reducing the cost of deliveries.

“The discounts that platforms were offering last year to acquire and keep customers as also initiate more repeat buyers have now been passed on to the restaurants to sponsor,” said Samir Kuckreja, former head of Zomato Base & CEO at consultancy firm Tasanaya Hospitality. But, for the two bitter rivals in the space – Zomato and Swiggy – 2018 will be the year where they may have to make the all-important decision between a complicated marriage or continue their rivalry by raising capital, both of which are being deliberated by the companies.

Print News Email News Back
Bookmark to Add to NewsvineNewsvine Bookmark with Digg ItDigg
Add RSS to Add to Google Add to My Yahoo! Subscribe with Bloglines Subscribe
* Name :    
* Email :    
* Message :  
  H&R Johnson opens sixth Experience Store in India to service Customers, Architects & Designers as a one-stop-shop
  Conrad Maldives Rangali Island Announces Opening of The Muraka, World’s First-of-its-Kind Residence
Receive the best of Hospitality content in your mailbox.
Weekly e-Newsletter
Events Calendar
IITT(India International Travel & Tourism Exhibition)
January 10 -12, Bandra Kurla Complex, Mumbai

SATTE(South Asia's Leading Travel Show)
January 16 - 18, India Expo Mart, Greater Noida, Delhi-NCR

© Copyright 2016 Saffron Synergies Pvt Ltd