Here's how Zomato is streamlining operations to attain long-term profitability

Citing poor performance, food delivery platform Zomato recently withdrew from 225 smaller cities as they contributed only 0.3 per cent to the company’s gross order value (GOV) in Q3FY23. The slowdown was more pronounced in the top eight cities that drive a majority of the demand on the platform.

“The company did not feel the payback period on its investments in these cities was acceptable,” Zomato CFO Akshant Goyal told shareholders in a letter.

In the December 2022 quarter, Zomato’s adjusted revenue for food delivery saw a 1 per cent de-growth to `1,565 crore from Rs 1,581 crore in the previous quarter. Even though GOV grew just 0.7 per cent, the number of orders declined sequentially.

The move could be seen as a strategic step towards sustainable growth, underscoring Zomato’s determination to streamline operations and achieve profitability.

In January, Zomato closed its quick delivery service ‘Instant’ after running a pilot for 10 months. The road map points towards a concentrated effort to grow deeper in core cities, capture more market share, bring down cash burn and improve unit economics.

“Zomato has been trying many things, but it seems like nothing’s clicking. They’re not an up-and-coming start-up any more, so it’s about time they start focussing on profitability. Everyone—from the higher-ups to investors—has woken up to that fact,” a food-tech entrepreneur tells Business Today on the condition of anonymity. The move by Zomato is a “smart” one and shows where its priorities lie. “I wouldn’t be surprised if they cut back even further on locations and verticals that aren’t bringing in cash,” the person adds.

Per sources, Zomato is going slow on all other non-core initiatives, including its intercity food delivery service, Intercity Legends. The company is yet to take a firm view on the size of this project’s opportunity, given its cost, market size and other challenges. If recent statements from Zomato CEO Deepinder Goyal are any indication, the company’s current focus is crystal clear—it’s profitability at all costs. “Having a profitability mindset is the key. As a company, we have been constantly re-evaluating and optimising investments, including taking a hard look at resource allocation across functions, shutting down non-performing markets, and reassessing our headcount, among others,” Goyal had written in a letter to shareholders.

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