Food-delivery and restaurant discovery platform Zomato has pulled out of around 225 smaller cities last month, the company said in its December-quarter earnings report. “Recently, in the month of January, we have exited ~225 smaller cities which contributed 0.3% of our GOV in Q3FY23. Performance of these cities was not very encouraging in the past few quarters and we did not feel the payback period on our investments in these cities was acceptable,” Zomato chief financial officer Akshant Goyal said in the company’s shareholders letter.
According to Zomato’s annual report for 2021-22 released in August last year, the food ordering and delivery business was present in more than 1,000 cities.
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Decline started post Diwali
“We have seen an industry-wide slowdown in the food delivery business since late October (post the festival of Diwali). This trend has been seen across the country but more so in the top 8 cities. As a result, GOV growth in food delivery in Q3FY23 was only 0.7% QoQ in an otherwise seasonally strong quarter. Orders declined QoQ while AOV grew. On a YoY basis, GOV grew 21% driven by order volume growth of 14% along with 6% growth in AOV,” said Goyal in the letter.
Zomato’s GOV – the total monetary value of orders including taxes, customer delivery charges, gross of all discounts, excluding tips – for its food delivery business was almost flat growing only 0.7% quarter-on-quarter to Rs 6,680 crore for the December quarter.
Earlier this week, the Gurugram-based company reported that its consolidated revenue grew 75% to Rs 1,948 crore in the October-December quarter, even as its loss jumped five times to Rs 346 crore. This includes the numbers for its quick-commerce business Blinkit and business-to-business vertical Hyperpure. On a year-on-year basis, the company’s adjusted food delivery revenue for the three-month period ended December 31 saw a 30% increase but witnessed a decline on a sequential basis.
Worst may be over
In the shareholders’ letter, Goyal added, “It remains a challenging demand environment, but we are seeing green shoots of demand coming back in the recent weeks, which makes us believe that the worst may be behind us.”
“We believe that the long term opportunity remains large and exciting. We think that the current slowdown is a result of a few temporary factors – a) macro slowdown for the mid-market segment, b) boom in dining out for the premium-end, and c) boom in travel at the premium-end,” said CEO Deepinder Goyal.
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