Zomato Online Business Model Analyses – Management Assignment Help

Assignment Task

Task 

Industry Overview
According to a Red seer report, India’s macroeconomic environment is on a growth curve, which is fueled by rising consumption, large working population & growth in urbanization. The internet penetration in India has more than doubled from 2015 to 2020 and is increasing further. A combination of low cost smartphones, cheap data rates and high-speed connections has enabled the above feat. Current internet penetration is at 49%, which is expected to increase to 68%.
The total addressable Food Services market opportunity is expected to grow to US $ 110 Bn by 2025. As seen in the attached figure, the total Food delivery market currently is only 10% of the overall food consumption market in India compared to the developed economies of US and China signaling a huge room for growth in the coming years. 

Zomato
Zomato describes itself as a, “creator of happier everyday lives” and calls itself an assortment provider. The introduction about themselves as given on their website is as given below:-

Who are we?
Launched in 2010, Our technology platform connects customers, restaurant partners and delivery partners, serving their multiple needs. Customers use our platform to search and discover restaurants, read and write customer generated reviews, view, and upload photos, order food delivery, book a table and make payments while dining-out at restaurants. On the other hand, we provide restaurant partners with industry-specific marketing tools, which enable them to engage and acquire customers to grow their business while also providing a reliable and efficient last mile delivery service. We also operate a one-stop procurement solution, Hyperpure, which supplies high quality ingredients and kitchen products to restaurant partners. We also provide our delivery partners with transparent and flexible earning opportunities.

The business of Zomato can be divided into the following verticals:-

1.For Foodies.    
a.    Search and discover restaurants.
b.    Read and write reviews along with photos of restaurants and food.
c.    Restaurant bookings and payment.

2.For Restaurants.
a.    Listing.
b.    Online ordering.
c.    Zomato Pro.
d.    Advertisement.
e.    Events: Organization of Food Carnivals filled with Food, Fun and Frolic!
f.    Hyperpure: Supply of fresh and high quality ingredients to restaurants for serving delicious meals.

3.For Enterprises.
a.    Customised Solutions
b.    Self-Serve Portal.
c.    Dedicated Account Manager.
d.    Exclusive Benefits for the employees of the enterprise.

Business Model Analysis

Zomato’s commercial model is very different from Swiggy and Foodpanda’s contemporaries. This application was the innovator of online food applications, therefore Zomato’s acceptance of “online restaurant searches” was a major issue for the market. Zomato’s business strategy is a well-orchestrated plan that includes several factors for the seamless operation of the application. Below are some of Zomato’s important elements.
Value proposition – The company model Zomato offers its clients a selection of values. Zomato focuses on the QAAA model, which promises and offers customers and partners quality, accessibility, accessibility, and portfolio. 
Zomato works to maintain an impartial platform. Hyperpure constantly helps to keep the food supplies high. Hyperpure Zomato’s project offers fresh, squeaky, clean, and high-quality meals to its partnering eateries. Zomato supply has extended from its beginnings to increasing numbers of towns and cities. They are vigorously growing their services. Now they give reservations for the tables, cater for companies, and feed India. 
 

Zomato Target Audience
 
Zomato’s core consumer is young people between 18 and 35 years of age and those who often want to eat with friends and colleagues. It targets clients who are frequently referring to ratings and reviews and want to decide whether their location is good. The clients want to have a nice time with their pals and are confident the place’s worth the fee. It also targets foodstuffs that want to share food with people and experience it. They want to know where to obtain the best meals in the city and visit the eateries. All online opinion seekers of restaurants are the goal of consumption.

Zomato Revenue Model
      
Since its inception, Zomato has increased its global position in the culinary business. Zomato has produced numerous streams of income, and some are given here, helping you understand how Zomato makes enormous profits by using its business model and diversity.
 

Zomato Channels
 Zomato provides its platform available via several ways of access:
•An Application (smartphone or tablet)
•Official Zomato website.
 

How Does Zomato Make Money?
Some of the ways Zomato money earns money are listed below:

Zomato Advertising
Zomato charges restaurants a fee to showcase the restaurant on its site. The higher the hierarchy and the number of times it shows on the top results the more money the restaurant pays Zomato. Zomato also suggests restaurant-specific ads to show on the site such as banner ads and small pop-ups. Restaurants can pay to have their events promoted and various other features.
 

Zomato Delivery Charges 
Zomato charges a nominal fee to bring the food from the restaurant to your doorstep. The delivery fee is further distributed among the restaurant owner and Zomato. Zomato then in turn pays the delivery boy a certain fee as his/her salary. GST levied on foodstuffs by the restaurant holder is 18% as mandated by the government. There is no separate GST on delivery charges.

Zomato Subscription Charges 
Zomato charges certain fees as subscription charges to Users. This is a marketing strategy to entice the customer to buy more at a considerable rate. For the same, Zomato charges fees. The fees once paid for the subscription are available for a certain time and then can be renewed as the time comes. This is called Zomato gold and Zomato pro.
 

Zomato White Label Access
Zomato also enables services such as Zomato Whitelabel under which they give offers to the restaurants to develop a customized food delivery app. It also works with cloud kitchens and restaurants for consultancy services. Zomato works with select restaurant operators to help in identifying locations for expansions at a minimal fixed cost, but with increased options for the user. It provides the requisite licenses and operational enablement for such restaurant partners.
 

Zomato Kitchens
Zomato partners with entrepreneurs to establish and manage Zomato Kitchens/Cloud kitchens on several labels to provide kitchen infrastructure services for selected restaurant operators. This helps companies to invest INR 35 Lakh and more in finance restaurants at the correct place. Zomato says that it provides investors a monthly return in the region of INR 2 Lakh to INR 4 Lakh with 180+ kitchens already in operation.
 
Zomato Live Events
Zomaland is one of India’s largest Food Carnivals which are organized at major metros and tier I & II towns as well from time to time. We have a wide range of culinary delights, an assortment of fun games, and an amazing artist line-up to ensure your weekend is truly what it should be – filled with Food, Fun, and Frolic!. Zomato charges users certain fees to get entry access to this showpiece event. It is an event where one can find fun, artistic works, and most importantly food varieties. One can find this on the Zomato App and even on PayTm Insider. 

Key Activities of Zomato

• Zomato is the connection between customers and restaurants.
• Zomato has an advertising-based user database reservoir. The company distributes ads for various good-income eateries.
• To continue improvements in customer experience Zomato carries out a variety of actions. It keeps its characteristics according to emerging trends.
• Zomato is aimed at ensuring that the information flows authentically for its users to solve two main questions: what they can eat and where to dine.
• Zomato was also launched to the foodstuffs industry and afterwards introduced a subscription option for food discovery solutions.
• Zomato has a large user database repository and employs various analytical algorithms to find essential data. This is the food for partner restaurants and restaurants’ customer service.
• Zomato also helps restaurants construct their robust app with a framework known as plug and play.

Predictive Analysis to Restaurants

As visible from the Platform analysis, there is a significant amount of data which is collected every second considering the number of users, partners and their continuous interaction with the platform. 

This rich data once analyzed is a rich source of data (while keeping customer privacy concerns in check), which is a goldmine for the Food Business Operators (FBU). The data once analyzed can help identify and help the FBUs define their strategies to garner additional business from consumers by creating value or reducing costs.

Some of the data points which can be clustered to garner actionable strategies are listed below
1.Customer sets with similar preferences (As in case of Netflix Cinematch Algorithm)
2.Restaurant Preferences/Cuisine preferences
3.Pricing preferences
4.Ordering times
5.Reviews and Ratings, etc.

The above information once analyzed, can also help create a psychometric profiling of consumers to design customized strategies for individual consumer. Zomato can develop live online tool which can be extended to the FBU’s which helps them track the various parameters like online consumers, their preferences, probability of ordering, etc. The below table is an illustrative dashboard as a service which can help create targeted discounting/offers by the FBUs.

Setting up own Restaurants/cloud kitchens

Why Zomato should enter the cloud kitchen and restaurant business? Few unique advantages

• Understanding of User penetration and preferences- They can very easily generate the demand for location, the type and taste of food preferred by consumers based on demography, age, number of clicks made through their App in Tier 1, 2 or 3 cities
• Supplier relationship- Already in good books of many restaurants around the country- this gives a leverage to help expand their business
• Data or Tech- Through their app it is easy for them to know the supply/demand mismatch, create right menu, robust inventory control, robust idea of consumer ratings for a particular cuisine. Zomato Base and Zomato trace are the key components which can go into these kitchens
• Owning staff and riders- This is a major boost to jump into the restaurant and cloud kitchen business as the delivery will take place in quick TAT, reduce idle time, reshuffle staff based on the requirement and based on a particular cuisine demand forecast. Managing own staff to be more convenient with increased efficiency.
• Eliminate the challenges faced by brick & mortar restaurant- Reduce infrastructure/real estate cost, reduce inventory cost, proper tracking of supply/demand, Not compromising SOP’s, reduce overheads, huge opportunity to organize and scale to reduce fragmentation of restaurant market, no need to provide front of house operations for service or staff.
• Technological advancement: May tie up with Robotics Company and use suitable robots to automate food preparation, a strategic bet to scale ultrafast deliveries.

How Zomato can Capitalize: The Art of Generating ROI Sequence:
Order come from Zomato? Single kitchen, multiple restaurant “partner” brand? Restaurant take cares of the menu? Zomato delivers via its own riders

• Low upfront investment cost reduces OPEX (low property tax, low maintenance cost, low-cost utilities)
• Low Logistics cost- Have a good menu/brand selection as per the data suggest so that order distribution is uniform throughout the day, clubbing orders together, reach a high number of orders per kitchen so logistics become efficient.
• Use of hi end equipment and ML driven technology needs, swift data integration, seamless operations across functions: restrict human intervention in food preparation, well ahead inventory forecast, reduce training and development costs
• Automated technology- to enable faster food production, reduce idle time, Implement a sort of Kitchen display system for swift order management and easy recipe guidance.
• Control over Effective Inventory management and optimization to reduce surplus  
• Use of right supply chain solutions to increase margin.

Winning customer loyalty in a discount driven market by providing great service- packaging variations to be looked to that not only maintain the temperature of food items but also communicate the brand message (marketing) Research Reports to Food Industry According to consultancy.org, the global market research industry was estimated to be a $76 Billon industry in 2018 and growing at 5 – 6?GR.  One of the primary determinant of a good research report is the data used for analysis. In case of Zomato, there is no dearth of data. In fact, there is so much data that using it to create meaningful insights and decisions itself if a challenge. A reliable standard research reports fetch $500 to $1500 per copy/user. 

The research reports are always in high demand considering the industry size and opportunity available for the FBU’s. The research report can be useful to articulate plans, strategies for the FBU’s for business growth and profitability. In addition to the FBU’s the Food Manufacturers can also benefit for customizing their offerings for the B2B /B2C segments in line with the research findings. Zomato has in the past tried to create excitement by sharing some macro level insights as a part of brand building for the customers. With a small investment of analyst team or collaborating with research agencies, to convert the data insights into reports may be a good option.

Monetizing the offering (possible options):
1.Sales of Research reports to the industry.
2.Collaboration with research agencies to create these reports or release joint reports at a cost to research agency/direct user

Coaching Services to Restaurants
The review and rating mechanism on the Zomato platform provides good insights to Zomato and the restaurants to identify the areas of improvement at their ends. Zomato additionally would have a periodic change in the ratings of various restaurants, which may help identify locations, which have improved the ratings over a period. The learnings from such restaurants can be applied to the restaurant in need of improvement.
Price benchmarking across various restaurants is another element which can be analyzed and suggestions training provided to various restaurants to either optimize margins through right pricing or reduce pricing to gain more sales.

The data can help Zomato identify the below training requirements to the Restaurants and provide coaching/consulting services:
1.Improvement in food quality
2.Packaging improvements
3.Pricing corrections, pricing during different dayparts & ROI understanding
4.Training to the workforce at the restaurant
5.Good practices across other high rated restaurants
6.Use of Technology
7.Menu designing basis the items popularity in a particular geography 
8.Social Media & Marketing strategy, etc

Possible options for monetization:
1.Charging directly for the consultancy services
2.Revenue share basis the improved business of the restaurants
3.Additional Advertising revenue

Courier Delivery services 
Data is at the core for Zomato Platform. Apart from the customers and restaurants, the delivery partners/riders are one of the most critical elements of the business model. The success of the model depends on delivery partner’s satisfaction index as they 1st physical touchpoint for the customers and the restaurants. Among other factors of motivation, the key reason for becoming a delivery partner is the monetary benefits. Considering the monetary benefits aspect, Zomato can increase the same by either by increasing payout at the cost of its own margins or by giving enough work and optimizing the Cost/Revenue ratio of the riders.Zomato and its competitors like Swiggy have explored various avenues so far of grocery delivery, delivering parcels in limited area, etc.One additional possibility is collaborating with courier companies and helping them in collection and delivery of parcels as a service. This is considering the network established in major cities/towns across the country.The benefit for the courier company would be to optimize the end mile collection and delivery staff and move to a variable instead of a fixed cost. 

Monetizing the offering (possible options):
1.Charge the courier companies for collection/delivery