inter-city food delivery built to be profitable, will break even much faster: zomato

Zomato plans to expand its inter-city food delivery feature to about 5-10 cities over the next few months but not without an eye on profitability. While its intra-city food delivery service broke even in June quarter after starting in 2015, the food delivery firm expects the inter-city version to break even much faster.

“We are conscious of responsibly scaling up Inter-city Legends so that it is cost-efficient… It will not be years till this service breaks even,” said Rahul Ganjoo, chief executive officer of Zomato’s food delivery vertical.

After being piloted for select users in Gurugram last month, the inter-city food delivery service is being expanded to a few areas of Bengaluru this week. The company is banking on the festive period, which starts with Dussehra in early October, to increase the footprint of the service.

According to a person close to the developments, the inter-city version’s average order value has been seen to be over Rs 950 – around 2.5 times that of intra-city food deliveries. Moreover, 30 percent of the users ordering on any day are repeat customers while the average user rating is 4.3.

The average listing price of dishes on the inter-city feature is between Rs 600 and Rs 700. This amount typically includes packing and long distance transport charges of around Rs 200. Over and above the listing price, there is also a last mile delivery charge of up to Rs 80.

For instance, a serving of 10 pieces of ‘baked rosogolla’ from the famed Balaram Mullick & Radharaman Mullick Sweets shop of Kolkata shows a listing price of Rs 460 which includes the food price of Rs 240 and handling and packing charges of Rs 220. Taxes and last mile delivery charges of Rs 52 bring the final amount payable to Rs 602.

“I think consumers would be okay to pay such an amount for what is a luxury food service. For this reason, we are also being very careful with the restaurant we are onboarding so that they can truly fit the bill of a legend,” said Siddharth Jhawar, a vice-president at Zomato who is heading the inter-city foray.

At present, the supply side of the inter-city service boasts of 120 restaurants from 10 cities including Kolkata, Lucknow, Bengaluru, Delhi, Agra, Jaipur and Chennai.

Every inter-city order placed before 4:30 pm on a particular day is packed and ferried to a central hub of the supply-side city in the evening. It is stored in a refrigerator that cools down the food to 5-10 degrees celsius and is air-transported the next morning and delivered at the customer’s doorstep by 6 pm in the evening.

At present, the air-transport is being handled by third-party logistics providers like Shadowfax via commercial flights in the passenger luggage section. However, the company plans to slowly phase out the third-party logistics and take care of the inter-city delivery by itself when the service scales up, according to a person close to the developments who did not want to be quoted.

“It is hard to put a finger on the exact market size of inter-city food delivery. Perhaps, we could say that the entire food delivery segment is the addressable market,” said Jhawar.

“It is built to be profitable. So, we will break even soon,” he added.

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