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Zomato abandons plans to enter grocery delivery market after trial runs fall flat

With Zomato deciding to pull the plug on its grocery delivery pilot, it has pinned all hopes of competing in the market on Grofers.

Zomato’s grocery segment will cease operations from September 17 as per an email sent by the company to its grocery partners, Moneycontrol reported. The reasons cited by the company were gaps in order fulfillment, poor customer experience and increasing competition from rivals promising express delivery, the report added. 

“We have decided to shut down our grocery pilot and as of now, have no plans to run any other form of grocery delivery on our platform. Grofers has found high quality product market fit in 10-minute grocery stores and we believe our investment in the company will generate better outcomes for our shareholders than our in-house grocery effort,” a Zomato Spokesperson informed MediaNama while confirming the development.  

Zomato bought a 9.3 percent minority stake in Grofers in August this year. 

This is not the first time that Zomato has experimented with grocery delivery. It commenced a trial run in April last year as food orders surged due to the pandemic. The trial, however, came to an end within a few months. The recent July foray was Zomato’s second attempt at propping up a grocery delivery service. The company followed a marketplace model where its customers could shop from their neighbourhood stores. 

Zomato has been focusing on streamlining its business ever since it went public*. Zomato’s exit is an indicator that the firm is looking to consolidate its business and focus on offerings in which it can command a lion’s share. 

Zomato’s nutraceutical business also closes down

Zomato’s shuttering of its nutraceutical business comes on the heels of its pull-out from grocery delivery, as per the Moneycontrol report. The term “nutraceutical” means medicinally or nutritionally functional foods such as yogurt and supplements, among others. The company’s departure coincides with the government’s plan to introduce strict private label regulations for marketplace businesses in the country, the report said.

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The restaurant aggregator dabbled in this segment in November last year when the pandemic triggered an uptake in foods that purportedly boost immunity and improve physical well-being. Zomato had earlier reasoned that the category was a promising one during its announcement.

Zomato did not elaborate on its decision to exit the vertical when MediaNama reached out for a comment. 

Retraining its focus on core businesses

Zomato has been on a cleanup drive of late as it seeks to plug the losses burdening its balance sheet. It reported a consolidated loss of Rs. 356.2 crore in the quarter which ended on June 30, 2021.

  • The food delivery firm first dissolved its table reservation business in the US, NexTable, by entering into a stock purchase agreement with Justin Doshi, Thusith Desilva, and Robert Tyree for the sale of its stake at $100,000, Inc42 reported. 
  • The Guguram-based company then shut down its US subsidiary— Zomato US LLC (ZUL) — to focus on its India operations. It was known as UrbanSpoon earlier. ZUL’s contribution to Zomato’s turnover stood at nil.
  • The next ones to fall were Zomato’s two international subsidiaries in the United Kingdom and Singapore. Zomato UK Limited (ZUK) and Zomato Media Private Limited (ZMPL) had a net worth of Rs. 16.4 lakh and Rs. 6.5 lakh respectively. 

*Disclaimer: This author was allotted shares in Zomato’s IPO.

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