Zomato vs Swiggy- Where Will The War?Go?

The recent acquisition of Uber Eats India by Zomato has changed the dynamics of the food aggregator industry in India. The duopoly of Swiggy and Zomato has now led to a situation where mere competition on price might become unsustainable in the long run, as has always been feared by economists even when Uber Eats operated independently. 

There was a time when Swiggy, Zomato, and Uber Eats burnt huge amounts of cash to acquire new customers and retain existing ones by either offering penetrative pricing and discounts, acquiring operators like Scootsy that serve niche customer segments. They also went to the extent of cracking exclusive deals with restaurants, and sometimes in an attempt at vertical integration of the value chain. But as the market becomes more consolidated, both Swiggy and Zomato are looking for methods to reduce their costs, and it would be interesting to understand what direction this takes. More importantly, as both companies cut costs, it would be even more interesting to see the next thing that the two food aggregators compete on.

As business students last year, tired of the mess, my friends and I would invariably order food from Swiggy, Zomato or Uber Eats. And even though we would order from the same aggregator, and very frequently from the same restaurant, we failed to understand why Swiggy sent different delivery executives for multiple orders to be picked from and delivered to the same place. We blamed it on excessive cash and lack of optimization. Swiggy, however, changed this policy recently. Now, not only are orders from nearby places now picked up together, but orders for nearby addresses are also delivered together. What that has resulted in is a higher waiting time on an average for all orders on Swiggy- a consequence of ‘optimization’ that I now realize. According to reports from December 2019, Swiggy had reported a 500% increase in losses, with the majority of costs being devoted to delivery, advertising, and employees.

These cost cuts can only come at the expense of customer experience, which leads me to believe that the next war between Swiggy and Zomato would be fought on customer service, paramount of which would be delivery time. In a bid to reduce its own costs, Zomato has also gone the same route. But at the same time, Zomato has launched an ‘insurance’ scheme to ensure delivery within a stipulated time for the negligible amount of Rs. 10 per order. And in case the Zomato delivery executive fails to reach within 50 meters of your delivery location, Zomato will refund your money (up to Rs. 200). While Zomato claims that opting for this ‘insurance’ has no bearing on the time it takes to deliver an order, my personal experience states otherwise. In the last 24 orders that I placed, I used the Rs. 10 insurance for exactly half the orders, and 8 times out of 12, my order reached me on time. But the 12 times that I did not subscribe to Zomato’s insurance, my orders were invariably delayed.

When Swiggy launched Swiggy SUPER, I was quick to subscribe to it since it helped me reduce the amount I spent on delivery charges. But unlike Swiggy SUPER, Zomato’s insurance charges customers only for the orders that they want to insure. And for a small amount of Rs. 10, customers are assured a good experience, failing which their money would be refunded, no questions asked. Zomato has not only found a way to reduce its costs but also increase customers’ willingness to pay by increasing the perceived value they get.

The food aggregator space has never been more exciting, and even though aggregators are looking for more ways to reduce costs, it is only the customer who would benefit from it all. Zomato has played its move with its insurance on delivery. It’s now time to see what move Swiggy plays!

#FoodTech #Aggregators #Swiggy #Zomato #UberEats