The company is also looking to add more offerings to its loyalty programme, Gold, despite concerns about the potential impact on profitability, Rakesh Ranjan, chief executive for food delivery, said in an interview.
“If I want to have a gathering of 20 people at home…right now food delivery does not lend itself well into that kind of a use case. It’s winter, I want to have a party, or I want to do a small picnic in the local park. There are tons of such use cases in the offline world. But the food delivery does not lend itself into it very well. It’s only about tying some of those loose threads…so that’s what we’re going to be focusing on,” he said.
This June, Zomato introduced the multi-cart feature allowing users to order from multiple restaurants at the same time.
This rolls up into the Gurugram-based company’s broader strategy to introduce more use cases for food delivery in an effort to grow its total addressable market. Ranjan said Zomato is seeking to build “occasions” for customers to order more by initiating operational changes and through marketing campaigns.
“That’s one clear vector that we are going to be working on. We believe that occasional orderers, low frequency orderers, if they’re able to associate more occasions with Zomato and food delivery, then that’s a large base that we can address,” he said.
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Ranjan added that “building occasions” would be at the centre of Zomato’s new initiatives going ahead.The company also launched ‘Zomato Everyday’ earlier this year to target the value conscious, bottom of the pyramid customers.
For the July-September quarter, Zomato reported Rs 7,980 crore in gross order value (GOV) for food delivery, up 20% year-on-year. Almost 40% of this came from Zomato Gold.
Ranjan said the company is planning to add more non-food offerings to the programme.
“We understand that similar programmes are also available with our competitors and hence we want to make sure that our programme stands out not just on pricing, but also on experience. So, we will be investing time, energy and technology on improving the experience of our Gold customers,” he said.
“We’re also trying to see if we can offer Gold customers something outside food as well…we recently did a collaboration with Adidas, for example, where Gold customers had special privileges on Adidas…so we’re also trying to figure out if there are manifestations beyond food, which makes our customers feel more privileged but a lot of the work will happen just in terms of making sure that Gold customer experience of buying food on our platform is as impeccable as it can get,” Ranjan added.
Also read | Zomato replaces 10-minute delivery offering with home-style meals under ‘Everyday’
However, the expansion of Gold will not extend to Zomato-owned quick commerce platform Blinkit, he clarified.
Notably, Zomato’s key rival Swiggy, which operates a loyalty programme under the Swiggy One banner, covers both food delivery and quick commerce.
Further, while the high frequency customers from Gold are driving order growth for Zomato, the offerings are impacting margins on food delivery orders. While the company did not disclose the difference in margins between orders placed by subscribers of Gold against regular customers, it flagged during its September-quarter earnings that Gold orders were “meaningfully worse-off” on contribution margin than non-Gold orders.
“We recognise the fact that margins get diluted…but Gold also powers a lot of growth,” Ranjan said. “What we are now prioritising at least for the next couple of months is that we don’t want to bug ourselves a lot with margin dilution. We think that Gold is still a good growth lever for the entire ecosystem. And we want to continue powering Gold and continue to get the volume and the GOV growth that comes with it.”
New initiatives
Zomato is, meanwhile, scaling down on some of its earlier initiatives that haven’t performed as per expectations.
One such feature is Zomato Legends, under which the company had started intercity delivery of food. On the one hand, the company has discontinued the programme from certain cities in which it was offering the intercity delivery service, it has also tweaked the product to a 60-minute delivery service that delivers pre-stocked food items.
“We are constantly trying to evaluate many opportunities and have almost nil sunk cost bias. If something doesn’t work, we don’t need to stick to it for very long,” Ranjan said.
“Legends was done in a particular way. It was loved by our customers, but it wasn’t helping us scale. In fact, for a good set of customers, it wasn’t helping solve their hunger pangs, because the food was getting delivered the next day. So, it had to be reengineered a little bit,” he added.