“Every person should have the luxury of choice and the ability to order a reasonably priced meal" is Rapido’s mission as it firms up plans to enter the food delivery market, with an initial pilot in Bengaluru, and disrupt the duopoly that Zomato and Swiggy have long enjoyed.
According to its pitch to restaurateurs, a copy of which Moneycontrol has reviewed, Rapido is calling its food delivery offering as “Ownly”. While there are chances that the name of the business unit changes closer to time, the company’s goal, of making meals more affordable to consumers, will remain unchanged.
Under the current regime, several restaurant owners have accused Zomato and Swiggy of high commissions, preferential treatment, higher customer acquisition costs (CACs) and more. Together, all of those reasons have forced business owners to look beyond the two companies for a third alternative.
In the past, Coca Cola-backed Thrive attempted food delivery and positioned itself as a challenger but ultimately had to shutter operations as the business failed to take off.
However, there are more options. Government-backed Open Network for Digital Commerce (ONDC), Zomato-funded Magicpin, Zepto Cafe, Blinkit’s Bistro, Swish and more, are all growing but are yet to reach a meaningful scale which will disrupt the Zomato and Swiggy food delivery duopoly.
While Zomato completes over 2.5 million food deliveries each day, Swiggy does over 2 million food deliveries each day. The two companies together account for a 95 percent market share in the food delivery industry which is over $8 billion in size.
However, there are challenger brands emerging.
Enter Rapido
Rapido, in its pitch, said it enables 4 million rides in 500 Indian cities and has 30 million monthly active users, which positions it as a strong challenger brand, especially given its scale.
Rapido is also playing on another key theme: ensuring that online prices are at par with prices offline. “We will only be looking to work with partners who can commit to this stand of honest pricing,” Rapido said in its proposal.
Rapido plans to do that through zero commissions on food delivery, not allowing restaurants to charge packaging costs separately and not leveraging discounts/advertisements as a push to acquire customers, as per the document.
Essentially, Rapido will introduce minimal layers of costs so restaurants can price products at a more reasonable price.
A significant markup, sometimes even a 40 percent increment, in food prices in the online world has proven to be one of the biggest deterrents for users to order food online.
Rapido, however, promises to change that.
“The price of a dish (excluding GST) is the final price the customer pays. There is no other addition from us or a restaurant partner. Offline price = Online price,” Rapido’s proposal document said.
Rapido will charge a flat delivery fee of Rs 25 plus goods and service tax (GST) for all food orders above Rs 100. However, for all food orders that are Rs 100 and below, the delivery cost will be Rs 20. All of this for a standard 4 kilometre radius.
To be sure, the delivery costs will be borne by the restaurant partners and not the customers. In the initial days at least, customers will not pay any amount apart from the food’s costs plus GST.
Essentially, Rapido will introduce minimal layers of costs so restaurants can price products at a more reasonable price.
Swiggy and Zomato currently have several line items such as platform fee, packaging charges, GST on such costs, delivery fee and more, which cumulatively push up prices.
ALSO READ: Zomato introduces long-distance fee, rider assurance plan for restaurants to boost order margins
Rapido, however, intends to do away with all of that. Instead, it will make restaurants pay for the delivery and since it will operate a zero commission model, the restaurants can list food items online without a markup. That way, the customer also gets food at a more affordable price.
But, how will Rapido make money?
While these proposals sound enticing for restaurants and customers, Rapido still has a business to run and will need to make so its monthly cash burn of around $5 million does not increase further.
“We hope to bring delivery costs down across the industry…Once we have brought about real structural change in delivery prices, we will look to charge a flat subscription fee from restaurants. We will always remain zero commission,” Rapido’s proposal said.
The model is similar to the arrangement that Rapido has for its core offering, ride-hailing.
Apart from an eventual subscription model, Rapido will also play the volume game. The company aims to bring on new customers in large numbers so they transact more frequently.
“We believe that food continues to get more expensive online. As a result, a bulk of Bharat has been locked out of using online delivery platforms,” Rapido’s proposal read.
To tap new users and make food more affordable for the existing ones, Rapido has mandated its restaurant partners to list at least four meals that are priced at Rs 150 and below, the document showed.
Rapido is betting that affordable food options will attract more transacting users which will eventually drive up volumes and sales. This is also at odds with incumbent giants, Zomato and Swiggy, which are constantly trying to push up average order values (AOVs).
“Think of us as a low cost platform that is looking to get you a large number of new customers,” the document said.
Rapido will also allow restaurant partners to advertise on its platform, and the company will also share data with restaurants for them to drive marketing campaigns, which will further open up revenue streams for Rapido.
In response to Moneycontrol's queries, a Rapido spokesperson said: "At Rapido, we are constantly looking at opportunities to scale our services and bring greater convenience to our users. In line with this vision, we are currently test piloting an online food delivery app in the city of Bengaluru."
"The pilot aims to leverage our strong network of captains while assessing the potential to complement our existing services. It’s an exciting opportunity for us to learn, improve, and see how we can add even more value for our consumers. We’ll share more details on our plans as we move forward," the spokesperson added.
As the company gears up for a pilot in Bengaluru over the coming week, restaurant owners are excited about a serious third brand that is emerging as a challenger. However, it remains to be seen if Rapido can successfully change the food delivery landscape and force Swiggy, an investor in Rapido, and Zomato to follow suit or will Rapido eventually take the Zomato Swiggy route, too.
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