The Gurgaon-based restaurant discovery and food-ordering app Zomato will shut down its ordering service in Lucknow, Kochi, Indore and Coimbatore citing lack of volume growth.
The announcement comes just a few weeks after grocery startup Grofers said it would no longer deliver in Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam, saying smaller cities are not ready for hyper local business and its marketing efforts had not resulted in the expected volumes.
“The size of the market in these cities is small right now and is growing with time. We will re-launch when the time is right. In the meanwhile, we will continue to offer the best content (including scanned menus) to ensure that foodies are able to find and order great food,” Pankaj Chaddah, co-founder, Zomato, said in a statement.
Zomato launched its online food ordering business in April 2015, allowing its users to order food online from restaurants using the Zomato app, and had since expanded this offering to 14 cities.
The company said, despite its recent marketing efforts, including television ads, it did not see a significant increase in the order volumes in these cities. “These smaller cities are not yet entirely ready for the online food ordering business, but once they are, Zomato will reconsider its strategy.”
Order volume
The firm said the combined order volume in these four cities accounted for less than two per cent of its total order volumes. Overall, Zomato’s online order volume was growing at 40 per cent month-on-month. Less than five per cent of Zomato’s orders are discounted, it added.
Zomato has 75,000 restaurants listed on its platform in India. Customers can use the online ordering feature to order from 12,000 of them. Zomato also works with delivery partners Grab and Delhivery to offer delivery from restaurants which do not otherwise deliver food.
Major challenges
Challenges in scaling up, the high cost of customer acquisition and lack of differentiation have been the major headwinds for hyperlocal delivery startups, according to industry experts. A recent report by Kotak Institutional Equities pointed out that achieving scale on a sustainable basis in one city/geography will be a challenge, particularly outside metro cities for hyperlocal online retailers.
Cutting down staff strength
Delivery startups have been going through tough times from the second half of last year, food delivery startups such as TinyOwl and Foodpanda are cutting down staff strength.
According to Rohit Bhatiani, director, Deloitte in India, the cost of customer acquisition is high and differentiation is less, which was a major problem with food ordering side.
Delivery startups have been going through tough times from the second half of last year
