The Uber Eats deal helps Zomato to catapult to the number one slot, leaving market leader Swiggy slightly behind.
If
the telecom industry runs the risk of becoming a duopoly, the fast
growing $4-billion online food delivery space has already turned into
a two-horse race. Cab aggregator Uber India’s sale of its food
delivery business on Tuesday has clearly set the stage for a Zomato
versus Swiggy play.
The
signs of consolidation were already there as losses piled up. Last
year, Uber India’s rival, Ola, which had earlier acquired
Foodpanda, closed down its online food delivery business to move into
cloud kitchen services due to aggressive competition.
Seven
months later, there’s no room for a third entity in the fight for
domination.
In
an all stock deal, Uber will get a 9.9 per cent stake in Zomato.
According to analysts, the value of the deal is in the region of
$350-400 million.
RedSeer
data shows that revenues have seen significant growth—up to 150 per
cent in 2019—in the food delivery business. But, losses have hit
the roof. In many cases, the losses surpass the revenues.
The
huge discounts to acquire customers, clubbed with high delivery costs
and aggressive promotions, have caused the bloodbath. Even so, the
customer numbers are impressive, helping in the subsequent funding
rounds.
Indeed,
cash strapped companies have always looked for fresh funding to
continue to grow. For instance, in the case of Uber
Eats, India made up for more than 3 per cent of its global gross
revenues in the last three quarters and it already grabbed 12 per
cent of the market share. At the same time, around 25 per cent of
Uber Eats’ global losses came from India in the corresponding
period.
Profitability,
a goalpost for investors, has been a mirage in the food delivery
business. Even Zomato, backed by Alibaba, has been struggling to make
money with its losses rising tenfold in March 2019 to cross the Rs
1,000-crore figure. Its revenues in the same period soared 188 per
cent to Rs 1,397 crore.
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