At a time when competition in the food-tech space is heating up, restaurant discovery and online ordering platform Zomato has announced that it has turned profitable.
In a blogpost, Deepinder Goyal, founder and CEO of Zomato announced that Zomato has started making money across the 24 countries that it operates in.
“Our core advertising business in India, Southeast Asia, and the Middle East - the three key regions for us, is generating enough cash to cover for the millions of dollars of investments we are making into the rest of the regions, and our new businesses (like online food ordering, table reservations, Zomato Gold, Zomato Base, etc.),” he said in the post.
Over the past couple of month, Zomato has been working on reaching profitability by reducing its burn rate significantly. It reported in April that it reduced its burn rate by 81% for FY17 to $12 million (Rs 77.9 crore) compared to $64 million (Rs 415 crore) a year before that. Last month, it also reported that it hit 3 million orders for the last 31-day period.
For the same year, Zomato reported a loss of Rs 389 crore on a revenue of Rs 332.3 crore.
Zomato has also announced that after having hit profitability, Zomato will stop charging commission from restaurants for all food orders placed through Zomato.
“To all our valuable restaurant partners - you are going to pay zero commission to Zomato if you qualify based on a set of predefined criteria. Some of these criteria include the number of orders you process with us on a weekly basis, and whether your customers are happy with your food and service. If you are in the business of providing great food and service to our customers, we want you to make more money so that you can continue to do more of the same,” Deepinder said in the post.
As per its current data, 70% of its restaurant partner base qualify for this.
Zomato was so far charging 15-20% commission per order. However, the commission was based on rating where it charged high-rated restaurants a lesser commission.
Zomato had earlier announced plans of charging zero commission after it reached a break even in six markets across the globe. However, it does not seem like it went ahead with the plan at that time, which many experts raised doubts over as it would pose as a barrier to meeting its operational profitability target for the year.
This move by Zomato will be a major boost to the startup, especially at a time when competition is rife in the foodtech space.
The past six to eight months has seen traction slowly returning to the foodtech sector which saw a bloodbath in 2016 as several startups trying to operate in this space shut shop.
For its food ordering business, which is relatively new, Zomato is up against Swiggy, which is backed by the likes of Naspers, Accel Partners and SAIF. UberEATS too, recently entered the market and currently has a presence in three cities.
In a bid to take on these players, it acquired Runnr last week to boost its delivery business.