Zomato’s food delivery biz slowed down in Dec quarter as dine-out and travel returned

Zomato’s food delivery business may be slowing down. The food tech firm, which reported its Q3FY23 results late Thursday evening, shared that its food orders declined sequentially (QoQ) in the December quarter due to an industry-wide slump in the food delivery business. While the trend was seen across the country, it was more pronounced in the top 8 cities, which drives a majority of the demand on the platform.

Zomato CEO Deepinder Goyal attributed this to two reasons: 1) the return of dine-out which saw a surge in the post-Diwali period; and 2) a boom in travel at the premium end of the customer segment. “We believe that the long-term opportunity remains large and exciting, and the current slowdown is a result of a few temporary factors,” Goyal stated in a letter to shareholders.

In Q3, Zomato’s adjusted revenue for food delivery saw a 1 per cent degrowth sequentially from Rs 1,581 crore in Q2 to Rs 1,565 crore. Even though the Gross Order Value (GOV) grew a paltry 0.7 per cent over the September quarter, the number of orders declined sequentially. Zomato had 17.4 million monthly users ordering food, down marginally from 17.5 million in the September quarter.

“It remains a challenging demand environment, but we are seeing green shoots of demand coming back in the recent weeks, which makes us believe that the worst may be behind us,” Akshant Goyal, CFO at Zomato, stated.

On a YoY basis, however, Zomato’s adjusted revenue in food delivery was up 30 per cent as GOV increased 21 per cent and order volumes were up 14 per cent. Even monthly transacting users in Q3FY23 increased 13.72 per cent from 15.3 million in Q3FY22.

Zomato also added that the number of power users on its platform was increasing. In CY22, customers who ordered >50 times a year grew by ~50 per cent YoY to 2.7 million as compared to 1.8 million in CY21. And customers ordering more than 100 times a year (~2 orders every week) increased by an impressive ~70 per cent YoY. However, total new customer addition dropped marginally from 23.6 million in CY21 to 23 million in CY22. (New customers are those who placed at least one order on Zomato in the year.)

In order to arrest the drop in the food delivery segment, Zomato relaunched its Gold membership programme in January (Q4FY23). This promises customers perks like an ‘On Time Guarantee’, priority access to more restaurants during peak hours, and offers from a number of restaurants on both delivery and dining-out -- all at an introductory price of Rs 149 for three months.

In less than a month of its relaunch, the Zomato Gold programme has crossed 900,000+ members. “We think that the new programme is more sustainable for customers, restaurant partners, as well as our P&L. We expect this to drive loyalty and higher frequency of ordering going forward,” according to Goyal.

The company also revealed that it is working on “remodeling the Zomato Instant service” to offer home-style cooked meals at affordable prices to customers. The service, rebranded as Zomato Everyday, will roll out over the next few weeks. “We continue to stay focused on our long-term growth vectors without worrying too much about near-term growth pressures,” Goyal added.

Also read: TikTok fires entire India staff, 40 remaining employees given pink slips 3 years after ban

Also read: Starbucks charges couple Rs 3.67 lakh for two cups of coffee