In 2021-22, like Zomato, Swiggy more than doubled its revenues. Its revenues were about 1.3 times that of Zomato’s that year. However, Swiggy also burnt through significantly more cash to achieve this revenue growth. Swiggy’s net loss surged 125% in 2021-22, while Zomato’s losses widened at a slower rate of 49%. Similarly, Swiggy’s net cash outflow from operations stood at ₹3,900 crore, while Zomato’s was ₹693 crore.

Both companies face a balance between expanding the market and moving towards profitability sought by their investors. This is especially the case for Zomato, which went public in 2021 and whose stock has tumbled 64% from its all-time high. Both companies are still leaning towards growth. One reason is the untapped potential in online food-delivery. According to a December 2022 note by research firm Macquarie, India’s market penetration in this sector is only 7% compared with 50% in China and 35% in the US. It expects the sector to treble in size in value terms.

Change in Order

SWIGGY’S HIGHER revenues in 2021-22 were partly a construct of market share in food delivery and it preceding Zomato in quick commerce. Since then, though, its share in food delivery has dropped, from 50% during January-June 2021 to 46% in January-June 2022, according to a November 2022 research report by Kotak Securities using data released by Prosus (the Dutch-listed arm of South African technology investor Naspers and one of Swiggy’s largest investors).

In January-June 2022, Swiggy reported a 40% growth in gross merchandise value (GMV) to $1.3 billion, against Zomato’s 56% growth to $1.5 billion. While Swiggy had more restaurant partners than Zomato, the latter had more delivery riders. Swiggy’s higher revenues relative to market share suggests the company’s take rate, or the percentage of GMV that is converted to revenues, is higher. Kotak pointed out that the variance could also be due to a difference in revenue accounting.

HR Headwinds

THE OPERATIONS of both Swiggy and Zomato run on two very different sets of people. One set comprises high-end technology and managerial talent, typically the permanent employees of the company, who are needed to launch new products, drive innovation and crunch the data. The other is a large group of gig workers, or delivery partners. For example, as of 31 March 2022, Zomato had 3,517 permanent employees and about 285,000 average monthly active delivery partners.

The companies face two different sets of challenges with the two groups. One is in attracting and retaining the best technology talent. In 2021-22, Swiggy spent ₹1,709 crore on employee benefits and Zomato ₹1,633 crore. This expense head accounted for 30% and 39% of income from operations for Swiggy and Zomato, respectively. With the other set, there is a growing pushback from civil society on how gig workers are treated.

Balanced Diet

WHILE SWIGGY and Zomato form a duopoly today, that could change, just as Unified Payments Interface (UPI) disrupted wallets. The e-commerce industry, dominated by Amazon and Flipkart, recently saw the launch of the Open Network for Digital Commerce (ONDC). This promises to directly connect stakeholders and place more money in the hands of retailers. In food delivery, on an average order size of ₹398, a restaurant makes ₹307, according to Zomato.

Business threats in food delivery are pushing both Swiggy and Zomato into quick commerce. Zomato also supplies food products to restaurants, and its non-food delivery portion is expected to grow. Their investments in quick commerce are reflected in revenue growth. While competition will remain intense, so will the underlying temptation to chase growth.

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