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Managerial Economics Project
Firm Name: Zomato
Industry: Consumer Services
Done By
Adarsh NJ
19DM015
PGDM-A
Submitted To
Dr. Jagdish Shettigar
About the Company
Zomato is a Food service platform which offers information, menus, user reviews and
food delivery options from partner restaurants to its customers. It is an Indian based Private
limited company which was founded by Deepindar Goyal and Pankaj Chaddah in the year
2008. Currently it is providing services in around 24 countries, 10000+ cities and 100
million+ active users.
Zomato is known for its cost efficiency, fast delivery of food and customer
satisfaction through good quality food, affordability and accessibility.
Market Structure
“Last year, I used to say that India’s food-delivery market would be at 1 million
orders per day, it wouldn’t be bigger than that. Today, I have totally flipped and believe it is
going to get about 40-50 million orders per day (as we) build the market,”
- Deepindar Goyal, CEO of Zomato
From the words of the CEO of Zomato, it can clearly be understood that the need for
delivery of food in India is ever increasing and Zomato is catering to the needs of the
customers the way they want it. Currently the customer base who requires food delivered to
them is very large and there are only a few players in the market of food delivering, hence it
can be said that the existing market structure is Oligopolistic.
Figure 1
Figure 1 shows the average number of orders per month of each year for Zomato. It
can be understood that the growth of food industry is growing in an exponential rate. Even
though Zomato is the current market leader, other major food delivering apps like Swiggy,
Food Panda and Uber Eats are also showing such a similar trend.
1
3
21
38
0
5
10
15
20
25
30
35
40
2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9
AVERAGE NUMBER OF ORDERS PER MONTH IN
MILLION (YEARLY)
Average Numberof orders per month in million (Yearly)
Demand Factors
Since, Zomato is a consumer service kind of industry, the factors affecting the demand
will not be the same factors which affects the products. Some of the Demand factors include:
(a) Availability of Substitutes – There are various other substitutes that provide the same
services as Zomato does and hence this is a major factor that affects the demand of
Zomato. People generally go for the ones which give better offers and discounts. Like,
if Uber eats or Swiggy provide better prices for the same product that Zomato offers
then people will order from the other apps.
(b) Choice of Restaurants – Zomato shows the list of restaurants which are available for
the users to choose from on the basis of the user’s proximity with the restaurants in
that area. Hence, the restaurants those are available to deliver in a particular area or
city also can be a factor that affects the demand of zomato as people might not like
the listed restaurants and can go for some other alternative other than Zomato.
(c) Choice of Food – Just like the Restaurants, if the preferred choice of food is not
available for ordering, people can go for alternatives. India being a country of various
cultures and food preferences; and Zomato being available mainly on major cities
where the diversity of people can be seen very hugely, very varied needs of food can
be observed.
(d) Income of consumer – Income level of consumers have an indirect relationship with
demand. As people’s income level increases, they will start looking for more
convenience and Zomato can be as convenient as possible since it delivers food to
your doorstep, the demand for Zomato increases with increase in consumer’s income
or vice-versa.
Supply Factors
Just like demands, Zomato being a consumer service driven business model, supply
factors are unlike products. Some of the factors influencing supply are:
(a) Government Policies – Government tend to change their policies and norms from time
to time and this in turn can affect the supply of providing food delivery services.
(b) Goals of the firm – If the firm decides to change their goal from achieving maximum
profit to achieving maximum outputs, in this case deliveries, then the supply will be
having an increase at the same price. This factor is true for vice versa as well.
(c) Location of Services – Depending on the places or locations where Zomato is
providing their services can also gravely affect its supply. If it is providing their
services at some rural regions, then its supply would be comparatively lower that the
supply in Urban areas.
(d) Restaurants – Zomato greatly depend upon all the restaurants those which they have
partnered up with. In this case, Restaurants can be termed as their suppliers. So if one
day all the restaurants decided to not provide their supplies to Zomato, then the supply
of Zomato will be affected drastically.
(e) Traffic conditions – The delivery of the food in time depends on the traffic conditions
as well. Zomato ensures that they will deliver the food ordered by their customers
under 30 to 40 mins of placing the order depending upon the distance of the customer
and the restaurant. Choosing of the restaurants are all in the hands of the customers
whereas, the traffic conditions are not. Hence, some customers can even cancel their
order if the delivery is late.
Challenges Faced by Zomato
1) Price Optimization – During the starting stages of Zomato, the company faced a
lot of issues relating to give their services at a price that are profitable to them as
well as the customers. Hence, coming up with the perfect prices of different
products took some time and effort for them.
2) Managing Costs – Cost management was also a challenge faced. They are trying
to access all the parts of the country with a minimum investment. They have to
choose the restaurants efficiently according to the needs of the customers.
3) Understanding of the locality – Even Zomato knew about the different
requirement of needs among the people from one locality to another, they found it
hard to cope with as they should invest a lot of time in understanding the locality
of the market before starting their service at each of their new places they plan on
expanding in the future.
4) Collusive Nature of the Competition – Zomato’s competition such as Yelp, Uber
Eats, Swiggy etc all were not willing to play in an equilibrium in this oligopolistic
market structure. The competition between Swiggy and Zomato was the one to be
specially noted as they were competing to be the market leader and have never
came into a tacit understanding. Both of them tried to lower their prices by
providing more discounts than the other and hence making the demand curve until
there is a less profit margin for both them.
5) Connection of Restaurants – Many of the major Restaurants in India were not
interested in joining hands with Zomato as Zomato charges around 23% percent of
the consumer’s bill and as far as the restaurant owners are concerned, this is a
huge sum. Zomato found it bit difficult to convince the restaurants about the good
side of joining with them, but once they understood it was only good for both of
them because restaurants started to get more and more orders than ever before.
Even though most of the restaurants shook hands with Zomato, there are still
many restaurants who doesn’t want to play along with Zomato. Also, recent
reports say that many restaurants are opting out of Zomato’s gold membership
scheme for premium paid customers because of deep discounting done by Zomato
to attract more customers to get their gold membership.
6) Decreasing the server latency – Since Zomato is an app-based business and uses
internet for their operations, servers play a major role. For controlling their
operations in various parts of the world, Zomato requires everything to be in sync
and for that they require their server latency to come down, hence they should
install more and more servers all around the world.
References
1. “Pankaj Chaddah (June 27th 2018), Three Problems we are trying to solve at Zomato
https://www.zomato.com/blog/three-problems-we-are-trying-to-solve-at-zomato”
2. “Deepinder Goyal (April 5th 2019), Zomato Annual Report FY19
https://www.zomato.com/blog/annual-report-19”
3. “Supraja Srinivasan (November 16th 2018), Zomato’s Full course strategy: From
supply to delivery
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/zomatos-full-
course-strategy-from-supply-to-delivery-and-
more/articleshow/66645881.cms?from=mdr”
4. “Raman, Prashant (2018), Zomato: A Shining armour in the foodtech sector, Vol 30,
Issue 3-4
https://search.proquest.com/abicomplete/docview/2203231975/CCAC8DF8C8D24CE6PQ/1
3?accountid=145616”
5. “Das, Goutham (May 24th, 2015), Zomato vs Foodpanda: Fight for the Pies: On paper,
Zomato is still leagues ahead of everyone else in the food space but online food
delivery company Foodpanda has picked up enormous funding and is on an
acquisitive and marketing binge
https://search.proquest.com/abicomplete/docview/1679177450/abstract/CCAC8DF8C8D24
CE6PQ/1?accountid=145616”

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Analysis on Zomato

  • 1. Managerial Economics Project Firm Name: Zomato Industry: Consumer Services Done By Adarsh NJ 19DM015 PGDM-A Submitted To Dr. Jagdish Shettigar
  • 2. About the Company Zomato is a Food service platform which offers information, menus, user reviews and food delivery options from partner restaurants to its customers. It is an Indian based Private limited company which was founded by Deepindar Goyal and Pankaj Chaddah in the year 2008. Currently it is providing services in around 24 countries, 10000+ cities and 100 million+ active users. Zomato is known for its cost efficiency, fast delivery of food and customer satisfaction through good quality food, affordability and accessibility. Market Structure “Last year, I used to say that India’s food-delivery market would be at 1 million orders per day, it wouldn’t be bigger than that. Today, I have totally flipped and believe it is going to get about 40-50 million orders per day (as we) build the market,” - Deepindar Goyal, CEO of Zomato From the words of the CEO of Zomato, it can clearly be understood that the need for delivery of food in India is ever increasing and Zomato is catering to the needs of the customers the way they want it. Currently the customer base who requires food delivered to them is very large and there are only a few players in the market of food delivering, hence it can be said that the existing market structure is Oligopolistic.
  • 3. Figure 1 Figure 1 shows the average number of orders per month of each year for Zomato. It can be understood that the growth of food industry is growing in an exponential rate. Even though Zomato is the current market leader, other major food delivering apps like Swiggy, Food Panda and Uber Eats are also showing such a similar trend. 1 3 21 38 0 5 10 15 20 25 30 35 40 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 AVERAGE NUMBER OF ORDERS PER MONTH IN MILLION (YEARLY) Average Numberof orders per month in million (Yearly)
  • 4. Demand Factors Since, Zomato is a consumer service kind of industry, the factors affecting the demand will not be the same factors which affects the products. Some of the Demand factors include: (a) Availability of Substitutes – There are various other substitutes that provide the same services as Zomato does and hence this is a major factor that affects the demand of Zomato. People generally go for the ones which give better offers and discounts. Like, if Uber eats or Swiggy provide better prices for the same product that Zomato offers then people will order from the other apps. (b) Choice of Restaurants – Zomato shows the list of restaurants which are available for the users to choose from on the basis of the user’s proximity with the restaurants in that area. Hence, the restaurants those are available to deliver in a particular area or city also can be a factor that affects the demand of zomato as people might not like the listed restaurants and can go for some other alternative other than Zomato. (c) Choice of Food – Just like the Restaurants, if the preferred choice of food is not available for ordering, people can go for alternatives. India being a country of various cultures and food preferences; and Zomato being available mainly on major cities where the diversity of people can be seen very hugely, very varied needs of food can be observed. (d) Income of consumer – Income level of consumers have an indirect relationship with demand. As people’s income level increases, they will start looking for more convenience and Zomato can be as convenient as possible since it delivers food to your doorstep, the demand for Zomato increases with increase in consumer’s income or vice-versa.
  • 5. Supply Factors Just like demands, Zomato being a consumer service driven business model, supply factors are unlike products. Some of the factors influencing supply are: (a) Government Policies – Government tend to change their policies and norms from time to time and this in turn can affect the supply of providing food delivery services. (b) Goals of the firm – If the firm decides to change their goal from achieving maximum profit to achieving maximum outputs, in this case deliveries, then the supply will be having an increase at the same price. This factor is true for vice versa as well. (c) Location of Services – Depending on the places or locations where Zomato is providing their services can also gravely affect its supply. If it is providing their services at some rural regions, then its supply would be comparatively lower that the supply in Urban areas. (d) Restaurants – Zomato greatly depend upon all the restaurants those which they have partnered up with. In this case, Restaurants can be termed as their suppliers. So if one day all the restaurants decided to not provide their supplies to Zomato, then the supply of Zomato will be affected drastically. (e) Traffic conditions – The delivery of the food in time depends on the traffic conditions as well. Zomato ensures that they will deliver the food ordered by their customers under 30 to 40 mins of placing the order depending upon the distance of the customer and the restaurant. Choosing of the restaurants are all in the hands of the customers whereas, the traffic conditions are not. Hence, some customers can even cancel their order if the delivery is late.
  • 6. Challenges Faced by Zomato 1) Price Optimization – During the starting stages of Zomato, the company faced a lot of issues relating to give their services at a price that are profitable to them as well as the customers. Hence, coming up with the perfect prices of different products took some time and effort for them. 2) Managing Costs – Cost management was also a challenge faced. They are trying to access all the parts of the country with a minimum investment. They have to choose the restaurants efficiently according to the needs of the customers. 3) Understanding of the locality – Even Zomato knew about the different requirement of needs among the people from one locality to another, they found it hard to cope with as they should invest a lot of time in understanding the locality of the market before starting their service at each of their new places they plan on expanding in the future. 4) Collusive Nature of the Competition – Zomato’s competition such as Yelp, Uber Eats, Swiggy etc all were not willing to play in an equilibrium in this oligopolistic market structure. The competition between Swiggy and Zomato was the one to be specially noted as they were competing to be the market leader and have never came into a tacit understanding. Both of them tried to lower their prices by providing more discounts than the other and hence making the demand curve until there is a less profit margin for both them. 5) Connection of Restaurants – Many of the major Restaurants in India were not interested in joining hands with Zomato as Zomato charges around 23% percent of the consumer’s bill and as far as the restaurant owners are concerned, this is a huge sum. Zomato found it bit difficult to convince the restaurants about the good
  • 7. side of joining with them, but once they understood it was only good for both of them because restaurants started to get more and more orders than ever before. Even though most of the restaurants shook hands with Zomato, there are still many restaurants who doesn’t want to play along with Zomato. Also, recent reports say that many restaurants are opting out of Zomato’s gold membership scheme for premium paid customers because of deep discounting done by Zomato to attract more customers to get their gold membership. 6) Decreasing the server latency – Since Zomato is an app-based business and uses internet for their operations, servers play a major role. For controlling their operations in various parts of the world, Zomato requires everything to be in sync and for that they require their server latency to come down, hence they should install more and more servers all around the world.
  • 8. References 1. “Pankaj Chaddah (June 27th 2018), Three Problems we are trying to solve at Zomato https://www.zomato.com/blog/three-problems-we-are-trying-to-solve-at-zomato” 2. “Deepinder Goyal (April 5th 2019), Zomato Annual Report FY19 https://www.zomato.com/blog/annual-report-19” 3. “Supraja Srinivasan (November 16th 2018), Zomato’s Full course strategy: From supply to delivery https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/zomatos-full- course-strategy-from-supply-to-delivery-and- more/articleshow/66645881.cms?from=mdr” 4. “Raman, Prashant (2018), Zomato: A Shining armour in the foodtech sector, Vol 30, Issue 3-4 https://search.proquest.com/abicomplete/docview/2203231975/CCAC8DF8C8D24CE6PQ/1 3?accountid=145616” 5. “Das, Goutham (May 24th, 2015), Zomato vs Foodpanda: Fight for the Pies: On paper, Zomato is still leagues ahead of everyone else in the food space but online food delivery company Foodpanda has picked up enormous funding and is on an acquisitive and marketing binge https://search.proquest.com/abicomplete/docview/1679177450/abstract/CCAC8DF8C8D24 CE6PQ/1?accountid=145616”