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Will Zepto’s experimental Membership Program overcome the hurdles faced by Zomato Gold?

Earlier inputs from Zomato indicate that subscription programmes may bring down monthly transacting users and thus prove less profitable.

What’s the news: Zepto, a quick commerce company, is testing out a ‘Zepto Pass’ membership programme with select users “to improve customer experience,” reported Economic Times (ET). The company’s ‘experiment’ will provide an interesting contrast to Zomato’s earlier reports, which indicated that subscription programs reduced their Monthly Transacting Users (MTUs).

Zepto Pass offers free deliveries and discounts: As per the ET report, Zepto plans to offer the membership at INR 99 per month to provide unlimited free deliveries on orders worth more than INR 99 and discounts of up to 20 percent based on the order value. There appears to be a gradation in the benefits offered since the report said some users will be offered discounts for orders worth over INR 299 while others get discounts for orders over INR 699. Some users can get the service at an introductory price of INR 19.

With ‘Pass’, it has become the second quick commerce firm after Swiggy Instamart to offer subscription benefits.

What have past company activities indicated about subscription models?

Zepto is not alone in coming up with a subscription model. Swiggy Instamart has also offered subscription benefits to its customers. However, another industry major Zomato reported that such a business model led to a reduction in the number of monthly transacting users (MTUs), a closer look at the earnings call report by Zomato in June 2023 showed.  In Zomato’s case, this is related to its Zomato Gold services which recorded a decline during the quarter. At the time, Akshant Goyal, Chief Financial Officer of Zomato had explained that this was because of the clubbing of orders from households that have a single Zomato Gold membership.

Then in the November earnings report, Goyal said that “a Gold order is less profitable than a non-Gold order due to the impact of program benefits.” He also talked about how the cost per order is higher for the company due to higher delivery cost for longer distances, priority to Gold members during peak hours, a no-delay guarantee benefit for Gold members and low subscription fees.

“All of this results in Gold orders being meaningfully worse-off on contribution margin vis-à-vis non-Gold orders,” said Goyal, although he hoped to bridge this gap in future quarters.

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Also Read:

  • Earnings Call: Zomato’s Monthly Transacting Users Dropped Because Of Zomato Gold
  • Zomato Q2FY24 Results: EBITDA Jumps To Rs. 41 Crore, Reversing Q2FY23 Loss
  • Zomato Ties Up With IRCTC For Supply And Delivery Of Food
  • Tiger Global Sells 100% Of Its Stake In Zomato
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I'm interested in the shaping and strengthening of rights in the digital space. I cover cybersecurity, platform regulation, gig worker economy. In my free time, I'm either binge-watching an anime or off on a hike.

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