Zomato recently revealed its earnings for FY 2019, and they were slated at $ 206 Million. This is a huge increase in revenue for the company as it had earned $ 68 million in FY 2018. With more and more consumers using online services for delivery, this restaurant aggregator was bound to see some increase in its revenue. However, what’s shocking is the fact that though Zomato’s revenue has increased by 3x in a span of a year, the company is also facing significant losses. In FY 2018, Zomato’s losses were at $ 12 million. However, in FY 2019, these losses have increased to a staggering $ 294 million. This can be attributed to the fact that the company’s spending has also increased over the past year. While Zomato spent $ 80 million in FY 2018, it ended up spending $ 500 million in FY 2019.
This marks an increase in losses of 24x. Although most companies would be seriously alarmed by such high losses (and such a high increase in the losses too), Zomato is not fazed by this development. According to the company, these losses can be attributed to the food delivery vertical of its business, as well as the fact that it has entered a few new markets.
The company spoke about this to the media. It said “Food delivery in India is creating an entirely new market; 70% of our regular users in Kolhapur had never tried food delivery in their life (even over a phone call), and Zomato was the first food delivery experience of their lives,”
It further elaborated on this by saying “All the marketing investment we made in FY19 will bear fruit in FY20 and beyond — when we realize the LTV (Lifetime Value) of the users that we have acquired,”
Zomato is placing all its bets on the hopes that its new customers will be loyal to the brand. However, this is a very high bet to place as Indian customers tend to be quite fickle. Furthermore, the brand has been facing tough competition from Swiggy as well. Moreover, other brands like UberEats and Ola’s Foodpanda are also within this space. So, it may be a bit misguided for the company to believe that its customers are going to stay loyal to its brand no matter what.
However, Zomato is not very worried at the moment and believes that it is meeting all its targets. It said “This year, we hit all of the goals we had set for ourselves out of the park,”
Though the company is enjoying rapid growth, it should also make sure that it is monitoring its bottom line because losses like this can only be sustained for a short period.