Is Near Future of Restaurant Delivery Biz Grey? With a burgeoning global economic crisis and consumer preferences changing in the post-pandemic world, apps such as Zomato and Swiggy are experiencing an industry-wide slowdown in the food delivery business
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Indian food delivery businesses, such as aggregators Zomato and Swiggy, are witnessing a slowdown across the industry due to macroeconomic pressures, especially inflation, and changes in consumer preferences in favour of dining out and travelling more as 'normalcy' resumes in the post-COVID world.
Gurgaon-based Zomato on Thursday posted its financial results of the October-December quarter of FY23, reporting a rise in its net loss to INR 346.6 crore from INR 63.2 crore in the year-ago period. "We have seen an industry-wide slowdown in the food delivery business since last October (post Diwali). The trend has been seen across the country but more so in the top eight cities," said CFO Akshant Goyal.
Zomato founder CEO Deepinder Goyal further explained, "We think that the current slowdown is the result of a few temporary factors: macro slowdown for the mid-market segment, boom in dining out for the premium-end, and boom in travel at the premium-end."
Late last month, Bengaluru-based Swiggy announced that it was laying off 380 employees on account of challenging macroeconomic conditions. According to founder CEO Sriharsha Majety, while demand surged in 2021 during the second wave of COVID-19, causing Swiggy's delivery business to grow significantly, the growth rate for food delivery in 2022 proved lower than the company's projections as companies around the world were adjusting to the new normal with refreshed investment horizons and accelerated timelines for profitability.
"This meant that we needed to revisit our overall indirect costs to hit our profitability goals," said Majety, adding, "We needed to right-size our overall personnel costs." The company is also shutting down its Meat Marketplace.
In November 2022, e-tailer giant Amazon announced plans to shut down its online food delivery service, Amazon Food, to prepare for the global economic crisis predicted to be looming ahead. The service began in May 2020 as a pilot project based in Bengaluru. Even Softbank-backed Uber found food delivery business tough and sold its business to Zomato in India and shut down in at least eight other markets.
Unlike food delivery businesses, travel companies have made a comeback in 2022, with commercial aviation opening up and travel restrictions easing after almost two years since the beginning of the pandemic in a boost to the hospitality sector. "For the October-December quarter, we are at approximately 80 per cent recovery versus 2019. What is noteworthy is that our domestic travel business is witnessing an upward trajectory; an overall growth of 3.7 times versus pre-pandemic levels," Daniel D'Souza, President at Mumbai-based SOTC Travel, told DH in December last year.
