The Indian food delivery market is on a fast upward trajectory and with the steep growth, the competition has been growing too. While space has been defined as ‘overcrowded’ lately, there seems to be one major player that is outshining the rest. Based on the latest data published by Kalagato, a market intelligence company, Swiggy currently holds nearly half the market share in the food delivery space in India, in terms of the volume of transactions conducted. What must be even more satisfying for the company is the fact that Zomato, the main competitor for Swiggy, is reported to be trailing far behind with its transactions accounting for around 26% of the market share. Aman Kumar, the Chief Business Officer at Kalagato, attributes this success to Swiggy prioritizing the logistics side of things, which according to Kumar has made it “India’s go-to app for food delivery.”
Swiggy, founded in the year 2013, has seen a rapid growth rate in the market over the six years of its existence. Just this last year, it became the fastest Indian startup to be declared unicorn. By the end of 2018, it had crossed the mark of $ 1 Billion in funding, which was aimed at helping the company expand its operations to different countries, enhance its delivery network in India and expand the cloud kitchen model.
While these figures paint a nice picture for Swiggy, the management would do well not to ignore Zomato just yet. It still offers tough competition, especially due to greater reach across rural and urban areas of the country. Many people might already be discarding Zomato from the race for domination, that should not be the case, warns Kumar, “Those who believe Zomato has lost the battle to Swiggy would do well to remember that Zomato operates in multiple countries and has built a different niche for itself by focusing on Gold (membership program) which has found phenomenal success with diners”. Zomato leads the way in terms of app installs in Tier 1, 2 and 3 cities, while it is also picking up pace in terms of daily orders being conducted on the app.
While the two companies have been going neck to neck against each other in trying to grab a significant market share, there are a few burning concerns that need to be addressed. The strategy of offering deep discounts to build a customer base and gain customer loyalty might not be effective in the long term. This strategy has already proved harmful Foodpanda, which had even crossed Zomato’s number of transactions a few months back, but now finds itself struggling. Acquired by Ola in December 2017 for a value of $ 200 million, the company went heavy in offering huge discounts to try and capture a significant market share. This saw the company’s average order value fall spectacularly, which led to heavy losses. The latest news is that OLA has started delisting restaurants from the app in an effort to focus on cloud kitchens and other private labels.
This has been taken note of by the two big players Swiggy and Zomato. According to top sources, conscious efforts are being made to move away from the deep discount models, with discounts already being reduced by up to 40% and more reductions to be expected.
The latest news coming in from both these companies is that they are looking to raise around $ 700 million each by the end of this year, at a higher valuation than their previous investment rounds. In the last round of funding, Swiggy was valued at $ 3 Billion, while Zomato saw a valuation of $ 2.1 Billion. Based on reports, the new targets have been set for $ 4 Billion and $ 3 Billion for Swiggy and Zomato respectively.
With both these apps registering more than 1 million transactions every day, this fight for market share is only set to heat up. However, with deep discounts not proving the best strategy, it will be interesting to see what these apps will do to get more customers on board.