It seems like the massive increase in payouts to Zomato and Swiggyâ€™s last-mile delivery executives is not the only thing these FoodTech players are burning cash on. In a bid to lead the growing FoodTech market, Zomato and Swiggy are reportedly burning over Rs 200 crore every month.
If the figures being attributed to the monthly expenditure made by both Swiggy and Zomato are indeed true, then you looking at around $16 million to $18 million being spent by Swiggy and roughly $20 million by Zomato.
This cash is going towards various promotional activities to stay ahead of the fierce competition between the two rivals. To put this in perspective, the average cash burn used to hover around the $3 million - $4 million mark. It has spiraled to 4 to 5 times that now. Some of the lesser rivals like Uber Eats and Foodpanda are also spending but their figures are closer to $4 million - $5 million.
Observers point out that one can see that where Zomato has a strong presence, there Swiggy is bending its back to go all out and lure the customers away from them and onto its platform for ordering food. The same holds good as far as Zomatoâ€™s cash burn is concerned in cities where Swiggy has been more popular.
For the record, the major cities under focus for both the companies are Hyderabad, Bengaluru, Chennai and Delhi (NCR). One area they look at is the addition of restaurants onboard their respective apps. The higher the number of restaurants offering diverse cuisines, the larger the chances of people staying and placing orders on the app. This is how all food order aggregators are approaching the business.
The restaurants pay a cut on the orders these food order delivery companies bring to them. This percentage, which on an average, is pegged around 20% is used as a bait to make restaurants agree to sign up exclusively with one or the other company and that is where the game gets a little heated up.
As with any other business, the toss-up between high volumes and low margins versus keeping the expenses low and not budging on the margins will be seen here as well. Uber Eats may not be a large player, but it is not into splurging like the top 2 nor is it climbing down from the 30% it collects from the restaurants it has on its app.
The overall rationale seems to be the fact that Swiggy and Zomato too have come to believe that discounts and low prices are the way to a customerâ€™s heart and eventually to a growing market share. It is the same strategy cab aggregators Ola and Uber and e-tailers Amazon and Flipkart have been following.