Competitive Analysis of the Indian Food delivery industry- Zomato, Swiggy, UberEats and Foodpanda

State of the Indian Food Delivery Industry, 2018

The Indian food delivery industry is going through a phase of consolidation to survive and stay competitive in the market. This consolidation is taking place because the smaller players in the market want to exit and the cash rich players want to continue on their growth trajectory. Ola has recently acquired FoodPanda and FoodPanda has acquired HolaChef. This consoldiation is a result of fresh inflow of institutional money.

As the barriers to entry are fairly low due to the unsophisticated business model, the incumbents constantly face the threat of new competitors in the market which in turn puts pressure on the already wafer thin margins. This can be gauged from the fact that between 2013 and 2016, there were 400 food delivery apps.

Newer entrants that are leveraging Artificial Intelligence are also garnering investor interest. The current big four of the food delivery industry- FoodPanda, Zomato, UberEats, Swiggy need to keep expanding the coverage of the restaurants, servicable areas and rework their pricing models to stay competitive and grow. High cost of customer acquisition combined with low switching cost makes this an industry with high cash burn rate.

Product Segmentation and innovation in terms of backward integration (ie setting up kitchens to cater to their customers tastes and preferences) would make their business models sustainable and the food delivery industry exciting; the industry is expected to reach $ 2.5 Billion in turnover by 2021. The backward integration move would bring them in direct competition with kitchen based food-tech companies such as Box8 and Faasos.

App downloads and Ratings on Android:

1. Zomato- 702,184 (4.3 stars)
2. UberEats- 488,822 (4.2 stars)
3. Swiggy — 342,133 (4.2 starts)
4. FoodPanda — 1,49,030 (3.3 stars)

App downloads and ratings of kitchen based food-tech ventures on Android:

1. Faasos- 96,725 (4.1 stars)
2. Box8- 28,727 (4.2 stars)

Horizontal Integration play by Uber and Ola Cabs in India

Uber vs Ola cabs: head to head

Uber operates in only 31 Indian cities as compared to 110 serviced by Ola. Ola boasts of 1 million driver partners as compared to 450,000 driver partners on Uber’s platform. Uber hasn’t been expanding their servicable areas thus making it easier for Ola to make inroads and grab 56.2% marketshare in India. As of December 2017, Uber has 39.6% marketshare in India. According to maret intelligence reports, Uber also has a far higher uninstall rates as compared to Ola.

Given the fact that SoftBank is already a majority stakeholder in both Uber and Ola, we could either witness a strategic alliance or a merger (subject to Competition Commision of India approval). However, SoftBank board of Directors would rather prefer Uber to focus on Europe, US, Latin America and Australian market and wean away from the Indian market to restrict cash burn rate.

The horizontal integration play comes in light of increasing regulatory interference in price setting affecting profit margins and driver-partner commissions.

Cab Aggregators’ horizontal integration vs Food Aggregators

The competition in the food delivery ecosystem is cutthroat and market share up for grabs, Foodpanda has the supplychain advantage given that it’s acquired by Ola and has a vast network of driver partners; however, it doesn’t have the same brand recall, the same restaurant and serviceable area coverage as Swiggy and Zomato. UberEats has massive brand recall due to it being an offshoot of Uber but doesn’t have the same restaurant coverage that Swiggy and Zomato have. Zomato has the distinct advantage of being the “Google of food”. It is the go-to app Indian customers use to find and book a table in restaurants. However, Zomato lacks in scale and last mile delivery. Swiggy also faces the same issues as Zomato. Both Zomato and Swiggy don’t own the entire fleet and have some part of it contracted to third party logistics.

Zomato vs Swiggy vs Foodpanda vs UberEats : Market share, 2018

1. Swiggy has scaled 14 million monthly orders with an average order value of Rs. 380
2. Zomato has crossed 10.5 millon monthly orders with an average order value of Rs. 416
3. Foodpanda clocks in around 1.2 million monthly orders
4. UberEats cloks in around 750,000–1 million monthly orders

While Ola and Uber have deep pockets, Round 1 belongs to Swiggy and Zomato; who are market leaders in the food delivery space. While cab aggregators turned food delivers have the network, they lack in restaurant coverage. The food delivery market leaders facing the heat from cab aggregators have the restaurant coverage, brand recall but lack in area coverage. This makes it an evenly balanced competition.

Only time would tell if Swiggy and Zomato are able to capitalize on their first mover advantage.