Zomato's 10-minute delivery plan | Orders may jump, could be a tailwind for revenue growth, say experts

Zomato Instant - as it will be called, is set to be launched in Gurugram next month with four stations, Deepinder Goyal had announced, adding that the company will not penalise delivery agents for late deliveries.

A day after online food delivery service provider Zomato announced its plan to deliver food to customers in record 10 minutes, stakeholders and industry experts raised concerns over the viability of the delivery model.

In a series of slides on social media, Zomato founder Deepinder Goyal reassured stakeholders on the safety of delivery boys and the quality of food.  Goyal also clarified that the 10-minute food delivery will only happen for select food items and specific customer locations.

Few experts believe that the new delivery model could be a tailwind for the company's revenue growth, but questioned the practicality of the lower delivery time.

Also Read: 'Maggi, Poha, Biryani...': Zomato's Deepinder Goyal lists food items under 10-minute delivery plan

Zomato's Instant 10-Minute Delivery Plan: Expert's Take

1. Cost efficiency, win-win proposition for customers

''Zomato's new delivery model will raise the number of orders per delivery boy which may improve cost efficiency for the company,'' said Karan Taurani, Senior Vice President - Research Analyst, Elara Securities in an exclusive interview with CNBC-TV18.

''The customer experience will see a sharp improvement as the instant delivery will also enhance the taste of food. At times, a longer delivery time results in the food becoming soggy,'' said Taurani.

Practically, it may not be possible to deliver all orders in 10 minutes and there could be few constraints on how it will be achieved, but even if 20-30 percent orders are delivered within 10-15 minutes, overall it could bode very well in terms of driving efficiency, according to Taurani.

He added that Zomato's strategy is to match up with peers as Jubilant Food was the first to announce delivery from 30 minutes to 20 minutes.

2. Possible constraints

''The Zomato instant delivery model may not enable multiple orders per transit due to the lower delivery time,'' said Taurani. He explains that the instant delivery is a  globally-tested model - where one delivery boy delivers multiple orders per transit. However, multiple orders may not be possible for Zomato with this quick 10-minute delivery model.

Also Read: Zomato to join 10-minute-delivery bandwagon

3. Tailwind for revenue growth

''Once the instant delivery model kicks in, it could be a driver in terms of revenue growth as the number of orders are likely to jump,'' noted Taurani.

''Zomato may start charging for instant delivery and if customers are willing to pay - it could be a tailwind for revenue growth, in the medium to long term for the company,'' he explained.

Also Read: How Zomato will deliver Biryani, Momos, Omlette, Poha, Coffee in 10 minutes

Zomato Instant - as it will be called, is set to be launched in Gurugram next month with four stations, Deepinder Goyal had announced, adding that the company will not penalise delivery agents for late deliveries. He also claimed that the quality, hygiene, delivery partner safety, and packaging will not be compromised.

Zomato's stock has fallen by around 52 percent from its listing peak and is hovering just above the issue price of Rs 76. The company's operating loss has expanded as it posted an EBITDA loss of Rs 488 crore in the third quarter (October-December) of FY22.

On March 22, shares of Zomato settled 0.93 percent higher at Rs 81.10 apiece on the BSE.