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Zomato claims business back to pre-COVID levels, while Swiggy records total order values at 85%

Zomato founder Deepinder Goyal’s tweet sparks debate. Industry insiders point out that food-delivery platforms are talking about gross merchandise value, which has shot up as per-order value is much higher now, compared to pre-COVID days.

October 13, 2020 / 08:00 AM IST
Representative Image

Representative Image

As the country embarks on the fifth phase of unlock from the COVID-19- induced lockdown, Zomato has seen business back to pre-COVID levels.

In a social media post, Zomato founder Deepinder Goyal said that India’s food-delivery volumes have reached 100 percent, and a few cities were showing 120 percent of original food-delivery volumes.

Swiggy, on the other hand, said that it has processed 10 crore orders across food, medicine, grocery and other categories since the lockdown, and is seeing total order value at 80-85 percent of the pre-COVID numbers.

Goyal said he expected food delivery to grow by 15-25 percent month-on-month for the foreseeable future.

“Since March 23, we have delivered a total of 9.2 crore orders and there have been zero reported cases of COVID transmission through food delivery or our food-delivery agents,” he tweeted.

While this is obviously good news for the overall industry, restaurant and cloud kitchen owners who are the suppliers on these food-delivery platforms pointed out that Goyal could be actually talking about GMV (gross merchandise value) -- that is the amount paid for food ordered through Zomato.

However, an email query to Zomato for a clarification on the number went unanswered till the publication of the report.

What is GMV?

The big question here is what is GMV as a metric and how has it come back to pre-COVID levels? The answer lies in per-order value having gone up across delivery platforms. With multiple premium restaurants selling on Zomato and Swiggy, large value orders, as a share of overall sales, have gone up.

A restaurateur from New Delhi, who uses both the platforms, pointed out that food-delivery startups were seeing 60-70 percent of their orders in the sub-Rs 250 category during pre-COVID times.

For order value between Rs 250 and Rs 600, the share was between 15- 20 percent, with the last 5-10 percent being in the above-Rs 600 category. Platforms never made enough money on these small value orders, since the cost of delivering every order is almost the same.

Now, post-COVID, with consumers choosing to order in over dining out, the average ticket size has gone up. This is helping food-delivery platforms make more money per order, and, hence, report business volumes at pre-COVID levels.

Bulk ordering has pushed up average order values by 30-40 percent, a Swiggy spokesperson said.

Swiggy’s observations

Bengaluru-based food-tech competitor Swiggy said that it has already recorded close to 85 percent of pre-COVID order values. Since the lockdown, the Naspers-backed company said it has recorded more than 10 crore orders across categories like food, groceries, medicine and other household items.

“More than 200 cities have reached 90 percent of their pre-COVID GMV levels, with more than 70 cities seeing a full recovery,” a Swiggy spokesperson said.

“Certain micro pockets within the country have also reached 200 percent of their pre-COVID levels,” he added.

Swiggy has reported a five-fold jump in on-boarding of premium restaurants over the last few months, with 7,000 new restaurants, on an average, joining the platform. In the pre-COVID days, this number was around 4,000, the spokesperson said.

Swiggy further claimed that more than 50,000 restaurant partners have availed of its Jumpstart programme and have seen 30-40 percent business growth over the last few months. On June 16, the company announced this programme to help restaurants with hygiene protocols, safety kits, marketing drives and other initiatives.

Market sentiments

While food-delivery platforms might be seeing business getting back and actually becoming profitable, overall, the food and beverages industry is facing a very tough time. Like one restaurateur said: “It is just bloodbath out there.”

Restaurants are shutting down, many are closing their dining facilities and moving into online-only models. Industry insiders pointed out that a few popular brands are seeing good business, while the lesser known ones are far away from pre-COVID business volumes.

“Certain pockets are doing very well, like Khan Market in New Delhi. It has managed to attract the affluent class of consumers who stay close by and they trust these brands on hygiene,” said Thomas Fenn, who runs a restaurant in Delhi named Mahabelly, and is a member of the National Restaurant Association of India.

“Overall, my sense is footfalls continue to be only about 30-40 percent of the pre-COVID numbers,” he added.

So what delivery platforms are seeing is actually a large chunk of consumers who were looking to eat out at premium restaurants actually ordering in. Hence, the overall consumption pie might have become smaller, and, out of that, delivery is benefitting at the cost of dining in.

All not great in food delivery itself

Even in the delivery business, not all brands are in the same space. One cloud kitchen founder pointed out that overall order numbers on these platforms are still around 50-60 percent. Hence, many small places are shutting down as business becomes unviable.

“For every Rs 10 invested, if you could get 100 orders in pre-COVID days, now this number has gone down to max 50 to 60,” said a founder of a cloud kitchen startup on the condition of anonymity. He uses food delivery platforms for his business.

Industry sources pointed out that certain pockets of cities and small towns are seeing a massive jump in order volumes, driven mainly by COVID-19-induced reverse migration. Swiggy, for instance, said that cities like Kochi, Lucknow, Vizag, Guwahati and Mysore have exceeded pre-COVID volumes operating at 100-150 percent.

“If Goyal is indeed talking about the number of orders, maybe he is referring to smaller towns where people who have come back from a Mumbai or a Bengaluru are ordering frequently, thereby driving up numbers,” said a founder of a Bengaluru-based cloud kitchen startup.

The only big positive is the Indian Premier League, which is referred to as the Diwali season for food-delivery platforms. Rohan Agarwal, director at Redseer, pointed out he is expecting that food orders will go up during IPL weeks.

“In terms of number of orders, platforms had not reached pre-COVID numbers till September. Now, as people shed the fear of COVID contamination through food, we expect volumes to jump back,” he said.