At least once in our lives, we have all likely witnessed individuals queuing up and perusing various restaurant menus to select their lunch. It is quite astonishing to think that this simple concept gave rise to Foodiebay, a precursor to Zomato business model, which has now become one of the largest food aggregators globally.
Imagine a scenario where an individual experiences a sudden pang of hunger, yet finds themselves at a loss as to what to order and from where. Suddenly, Zomato comes to the rescue. By visiting the website, one can effortlessly browse through a plethora of restaurants, peruse their ratings, and ultimately select the most appealing option. In no time, the eagerly awaited delivery would arrive right at their doorstep.
Zomato appears to encompass a comprehensive range of activities, from discovering eateries and perusing reviews to facilitating food delivery or dining experiences. However, what exactly is Zomato and what does its business model entail? How does it operate and generate revenue? Furthermore, how has it managed to expand its presence to encompass more than 24 countries?
Let’s delve deeper into the business model of this food tech unicorn.
What Is Zomato?
Zomato operates as a platform that brings together customers, restaurant partners, and delivery partners, catering to their respective needs in the realm of restaurant discovery and food delivery.
This platform enables individuals to uncover and investigate various dining establishments, peruse menus, provide and peruse reviews, place food orders for delivery, or make reservations to dine in. Simultaneously, restaurant partners can enhance their visibility and reach, interact with customers, and benefit from a dependable delivery service.
Zomato was established in 2008 by Deepinder Goyal and Pankaj Chaddah, both graduates of IIT. Originally known as Foodiebay, this online restaurant directory was created to provide users with the ability to view restaurant menus along with additional features. The main goal was to transition traditional restaurant paper menus into a digital platform that is more convenient and user-friendly. Since its inception, Zomato has diversified into various other business sectors and has expanded globally, boasting approximately 32.1 million monthly active users across
+. Let’s explore the operational framework of this distinctive and sustainable business model.
How Does Zomato Work?
Zomato’s operational framework is straightforward yet highly efficient.
Customers utilize the website or application to search, explore, and discover various restaurants in order to either place an order for a meal or reserve a table for dining out. Upon receiving the order request, restaurant owners prepare the order and subsequently assign it to a delivery partner. This delivery partner is selected by the proprietary platform’s algorithm, which identifies the nearest and most suitable delivery personnel for the task. It is important to note that these delivery personnel are not employees, but rather partners to the company, and they possess the autonomy to accept or decline a delivery assignment.
Once a delivery job is accepted, the delivery providers proceed to deliver the order to the specified location. Customers have the option to make payments either during the ordering process or upon delivery. Additionally, customers have the opportunity to provide their feedback, which aids Zomato in enhancing its services and assists other customers in making well-informed decisions when placing their orders.
In simple terms, Zomato’s delivery operating model can be divided into three steps –
- Customers uses Zomato’s app to order from existing restaurants and food joints that have partnered with Zomato
- Zomato pings nearest and most apt delivery partner to deliver the order to the customer
- The delivery partner delivers the order
- Zomato and delivery partner get their commissions
Zomato’s dine-out operating model, on the other hand, deviates from the typical delivery service as it relies heavily on the subscription-based Zomato pro offering.
Zomato Pro provides exclusive benefits and discounts to its members through a premium subscription service. Subscribers can enjoy complimentary food and drinks, as well as special discount offers when ordering from partner restaurants. Additionally, they have access to exclusive delivery deals and receive priority treatment during the preparation and delivery of their orders, resulting in a faster overall process by 15-20% on average. Moreover, subscribers are eligible for a money-back guarantee if they do not save at least double the subscription fee of Zomato Pro during the subscription period.
Zomato’s Key Activities
The key activities of Zomato business model can be divided into seven categories. These are:
Restaurant listings
Zomato initially focused on being an online restaurant directory before expanding into other business sectors. The platform collaborates with restaurants, allowing them to gain more visibility by featuring them prominently on the feed. In return, Zomato charges these restaurants a commission. Additionally, restaurants have the option to pay for promoting their events and offers, aiming to attract more conversions from Zomato users.
Food Delivery
Zomato plays a crucial role in connecting customers, restaurants, and delivery partners through its food delivery service. Customers pay a delivery fee to the restaurants, who then pay a commission to Zomato for each delivery completed. The commission is divided between Zomato and the delivery partners. The distribution of commission earnings depends on whether Zomato handles the delivery or if the restaurant arranges it independently.
Live Events
Zomato made its foray into the branded live events market in 2018 by launching its food festival, Zomaland. The company has successfully hosted this culinary extravaganza in various Indian states, offering attendees the opportunity to enjoy live musical performances and a variety of entertainment activities.
White Label Access
Zomato offers Zomato Whit label, a range of technologies that allow restaurants to operate their businesses online. The main advantage of this platform is that restaurants can create personalized food delivery applications to connect and interact with their customers. Additionally, Zomato collaborates with specific restaurant operators to explore expansion opportunities at low expenses. It assists them by providing the necessary licences and fulfilling any other requirements they may have.
Zomato kitchens
Zomato collaborates with different entrepreneurs to offer kitchen infrastructure services to a specific group of restaurant operators. Through this partnership, Zomato assists in the establishment and management of Zomato kitchens under various brand names. This initiative enables entrepreneurs to financially support restaurants with an investment starting from Rs 35 lakh. In return, Zomato provides investors with monthly returns ranging from Rs 2 to 4 lakh. Currently, Zomato operates over 180 kitchens, successfully contributing to the growth of the food industry.
Hyperpure
Hyperpure is a program developed by Zomato with the objective of providing restaurants with a comprehensive range of products. This includes vegetables, fruits, meat, poultry, seafood, dairy, groceries, and beverages. The program achieves this by establishing direct partnerships with farmers and mills, encompassing both producers and processors, to ensure a seamless supply chain for these items.
Consultancy
Zomato possesses a vast collection of user databases, which it utilizes to uncover crucial information. These databases enable Zomato to gain insights into user preferences across various locations. By employing diverse analytical tools, Zomato offers consultancy services to its partner restaurants and other dining establishments.
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Zomato’s Key Partners
The customer segments of Zomato business model can be categorized as follows:
Local restaurants: Zomato collaborates with restaurants, aiding them in enhancing their visibility and online prominence to attract their desired audiences and explore untapped customer markets.
Users: Zomato serves as a remedy for users, offering a platform for searching, discovering, and exploring various restaurants and eateries, as well as ordering food or making reservations to dine out.
Delivery personnel: Zomato collaborates with delivery providers to ensure seamless doorstep delivery services for its customers, relying on their expertise in providing full-time or part-time delivery services to complete the entire delivery chain.
Reviewers: Critics diligently assess dining establishments, including restaurants, cafes, and other food venues, offering users valuable insights regarding the cuisine and various aspects of the establishment through written or visual content.
Zomato has formed partnerships with various other companies such as Uber Taxi, Visa, and Paypal. Through its collaboration with Uber taxi, customers can conveniently book a ride to their desired restaurants. This eliminates the hassle of using multiple apps and offers a comprehensive solution by allowing customers to book a cab and discover nearby restaurants all in one place. These partnerships also offer support in areas such as identifying suitable locations, recruitment processes, market research, accounting, and managing political and legal matters, among others.
Zomato’s Key Resources
Zomato has formed partnerships with various other companies such as Uber Taxi, Visa, and Paypal. Through its collaboration with Uber taxi, customers can conveniently book a ride to their desired restaurants. This eliminates the hassle of using multiple apps and offers a comprehensive solution by allowing customers to book a cab and discover nearby restaurants all in one place. These partnerships also offer support in areas such as identifying suitable locations, recruitment processes, market research, accounting, and managing political and legal matters, among others.
Zomato’s Key Channels
Zomato relies on its website and app as the primary means to provide its services to customers. The Zomato mobile app is accessible on android and iOS devices, while customers can also browse the website to discover restaurants and view their ratings. These essential channels enable Zomato to connect with and expand its customer base, boost sales, and improve the overall user experience of the platform. Additionally, Zomato has developed a dedicated site for sharing exclusive photos of delectable cuisines from various corners of the globe.
What Value Does Zomato Provide To Its Customers?
Zomato business model is based on the QAA model, that is, it provides quality, accessibility, affordability and assortment to its customers and partners.
- Improved Quality
- Increase accessibility
- Increased affordability
- Assortment
How Does Zomato Make Money?
Zomato has established itself as a key player in the food industry ever since its establishment. In 2020, the company generated an impressive revenue of $394 million, and there has been a significant growth in hyperpure’s revenue from $1.8 million in 2020 to $14.7 million in 2021. The wide range of activities undertaken by Zomato are crucial in driving its revenue.
Zomato Advertisements
Zomato collaborates with restaurants seeking to enhance their visibility and online presence by utilizing the platform. A significant portion of Zomato’s income is generated through advertising and promoting these restaurants, which in turn pay for these services.
Zomato Subscriptions
Zomato operates on a freemium model with a subscription-based service. The cZomato Pro provides exclusive discounts and offers to its customers for both dining out and food delivery services. These offers include (1+1) on food items and (2+2) on drinks, catering specifically to Zomato Pro users, who also enjoy expedited delivery services. In India, Zomato Pro offers a 3-month membership priced at Rs 200 and an annual pro membership priced at Rs 750.
Consultancy And Data Monetization
Zomato possesses the capability to analyze users’ behavior by leveraging its data repositories. This analysis provides valuable insights into the current trends in dishes, popular search queries, the demand for specific types of food, and more. In order to enhance and optimize their services based on user preferences, restaurant owners are required to subscribe to Zomato’s paid services, which grant them access to this valuable information.
Food Delivery Services
Zomato charges a commission for the restaurant partners for every delivery that it makes. It charges a commission of around 20-25% which can vary depending on different factors like location, timing, and so on.
Live Events
Zomato charges an entry fee for the carnivals and live events that it organizes in collaboration with different restaurants. These events are usually hosted on occasions like Christmas or New year’s eve in order to boost sales. The purchase of these tickets becomes a source of revenue for the company.
Zomato Kitchens
Zomato provides a cost-effective kitchen infrastructure service to restaurants aiming to expand their business to new areas. This enables them to attract a larger number of restaurant partners and generate higher revenues.
Costs Incurred
Zomato has to spend on a lot of operations and advertisements that it makes. The primary costs it incurs are:
Platform development: Zomato is heavily investing in platform development to enhance the user experience. This includes improving customer services, user interface, and overall online presence.
Branding and advertising: Zomato implements a diverse array of marketing initiatives and promotional activities in order to enhance its prominence and disseminate information to consumers regarding its exclusive deals and discounted offerings.
Credit card processing fees: Zomato has to pay for the credit card transactions that take place as well.
Office maintenance cost: Zomato operates in around 24 countries around the world which include India, Australia, UAE, USA, Turkey, and so on. Thus, it has to bear the maintenance costs of offices in all these countries that it operates in
Employees’ salary: Zomato employs a global workforce of more than 5000 individuals. The company is responsible for compensating these committed employees, who possess varying salary structures.
Legal and accounting fees: The organization is obligated to settle legal penalties and fees for mergers and acquisitions, along with obtaining various licenses that are necessary. Additionally, it is required to fulfil tax obligations for diverse objectives.
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