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Zomato hits 2 million online orders; Marketing budget for food ordering at $50k per month

Restaurant listing and food delivery company Zomato said that it has processed two million food orders till date. The company had started its online ordering service back in March 2015 and was limited to the Delhi-NCR region but has since grown to other cities in India such as Bangalore, Mumbai, Pune and Hyderabad. It also started food ordering in the UAE.

But hasn’t been all smooth sailing for Zomato and had to shut down food ordering in four cities – Lucknow, Indore, Cochin and Coimbatore. At the time, the company said that the size of the market in these cities accounted for less than 2% of its order volumes thus leading it to shut down operations.The company said marketing efforts, including television ads, didn’t help pick up volumes in these cities. In October 2015,  Zomato also laid off around 300 employees to contain costs.

Now, the company says that its marketing budget for food ordering still hovers around $50,000 per month.

Some other learnings from their blog:

– By platform, Android contributes ~48%, iPhone ~36% and Web ~16%

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– Average order value is  around Rs 430 for India and 62 Dirhams for UAE

– The share of restaurant-delivered orders is close to 90%. Note that Zomato doesn’t have an extensive fleet of delivery executives such as Swiggy. When HSBC cut the Zomato’s valuation, it mentioned that it needed to build a last mile delivery system for market leadership and profit. Zomato countered with: “there isn’t any food delivery company in the world which owns its last mile logistics fleet, operates at scale, and is profitable.” Details of the slug fest here.

– Average delivery time is approximately 38 minutes.

– Average commission rates of ~8.5% (for restaurant-delivered orders). This seems consistent. When I spoke to the owner of a neighbourhood parcel kitchen,  he mentioned that Zomato charges 10% commission per order while Swiggy charges a higher fee of 15% per order.

– Net margins on an order are around 55%.

– Online food ordering contributes to 20% revenue to overall topline. For the fiscal year 2015-16, Zomato reported operational revenues of Rs 184.97 crore but an operating EBITDA loss of Rs 492.27 crore for the period. India accounted for 45% of the revenues. This translates to India revenues of Rs 83.23 crore and the share of food ordering in this was around Rs 16.64 crore.

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