Moneycontrol PRO
Open App

Zomato starts integration of food and grocery delivery fleets in multiple cities

In the best-case scenario, a fully-integrated delivery fleet is expected to reduce delivery costs for the company by up to 40 percent and improve rider earnings

September 21, 2022 / 10:21 AM IST

In a move that can reduce delivery costs by up to 40 percent over time, Zomato has started testing the integration of food and grocery delivery fleets in parts of Delhi-NCR, Lucknow, Jaipur, Chennai and a few other cities,  according to people aware of the developments.

While the delivery partner apps of Zomato and its quick commerce subsidiary Blinkit still remain separate, a third rider app has been created where delivery executives can sign up to service both food and grocery orders.

Last month, Zomato completed an acquisition of Blinkit (erstwhile Grofers) in a $570 million deal. Since then, the food delivery app has also added a grocery delivery feature on its own consumer app.

“The fleet integration is being tested to see what works. The idea is to give delivery riders more work so that their earnings go up,” said a source who did not want to be named.

“There are some time slots during the day when there are fewer food delivery orders. The new system will allow the riders to take up grocery orders during those hours if they choose to,” he added.

Close

Both Zomato and its chief rival Swiggy have been facing opposition from their delivery partners for bringing down the level of incentives and reducing payouts per order over time. There have also been several instances where riders went on strike in cities like Bengaluru, Hyderabad, Delhi, Noida and Patna over compensation.

At the time of the announcement of the Blinkit deal, Zomato chief financial officer Akshant Goyal had indicated that the two companies might share delivery fleets to some extent.

“Quick commerce increases our addressable market, the potential profit pool and also makes our business more defensible. The peak demand times for food delivery are also complementary to the quick commerce demand peaks in non-meal times,” the CFO had said.

According to regulatory filings and previous media reports, Zomato has 285,000 delivery partners in more than 1,000 cities and Blinkit has over 10,000 riders in around 15 cities.

The company did not respond to queries on the matter till the time of publishing.

Delivery cost reduction

In the best-case scenario, a fully-integrated delivery fleet may not only improve rider earnings but is also expected to reduce delivery costs for the company by up to 40 percent, according to a person aware of an internal projection.

At present, the delivery cost of an average Zomato order is around 14 percent – meaning a delivery cost of about Rs 56 on an average order value of Rs 400.

The last-mile delivery cost in quick commerce is expected to settle down at a lower level than food delivery, given the shorter delivery times and higher number of orders delivered per hour.

Zomato’s delivery and related charges increased by 244 percent to Rs 1,814 crore in FY22 primarily due to increase in the availability fees (additional fees paid to the delivery partners over and above the customer delivery charge) by Rs 1,150 crore.

The company said in its annual report that total availability fees paid to the delivery partners have gone up on account of increase in the order volumes by 124 percent in FY22 over FY21 and partly on account of increase in fuel prices during the year.

In its June quarter earnings presentation, the Gurugram-based foodtech company had said that Blinkit delivered an estimated 8.3 million orders in July. This was a 63 percent increase from the 5.1 million orders it delivered in January, which was the first month of its operation after the pivot. During this period, the quick commerce company’s revenue rose around 239 percent to Rs 75 crore in July.

Meanwhile, Zomato claimed its food delivery segment hit break even in the June quarter with an adjusted EBITDA of 0. It had registered an adjusted EBITDA loss of Rs 80 crore in the March quarter and a loss of Rs 30 crore in the year-ago period in this segment.

The company’s net loss in the quarter almost halved (narrowed by 48 percent) on a year-on-year basis at Rs 186 crore whereas revenue grew 67.5 percent to Rs 1,414 crore.
Invite your friends and family to sign up for MC Tech 3, our daily newsletter that breaks down the biggest tech and startup stories of the day

Deepsekhar Choudhury Deepsekhar covers tech and startups at Moneycontrol. Tweets at @deepsekharc
first published: Sep 21, 2022 09:54 am
Sections
ISO 27001 - BSI Assurance Mark