Zomato, which began its food delivery business in 2015, became a unicorn in 2018 and is now one of the few start-ups in India to have turned profitable. While Zomato’s competitors are struggling to make profits in the segment, Zomato’s profit has soared to ₹253 crores (2.53 Billion Rupees) in Q2 from ₹2 crores in Q1 of 2024, representing a remarkable 12,550% increase in profit and a 74% rise in revenue.
In 2020, following the initial COVID-19 wave, Zomato’s business declined by 90%, while their costs remained unchanged. With only six months of funds left and no investors willing to take risks, Zomato was compelled to launch its IPO, despite being a loss-making company at the time. Even Zomato’s founder admitted that it faced a cash crunch a total of 6 times since its operations. On its journey, Zomato encountered numerous challenges in its efforts to become profitable. A milestone achieved by very few in the segment.
Image from India.com
How was Zomato able to become Profitable?
- Zomato Gold: In January 2023, Zomato launched a new loyalty program called Zomato Gold. They gave priority to Gold Subscribers for peak-hour delivery. As expected, orders from Gold subscribers not only helped retain customers but also made up a significant portion of Zomato’s total orders, as anticipated.
- Hyperpure: In April 2019, Zomato launched Hyperpure, a service that delivers fruits, vegetables, and other essential items directly from farms to restaurants. Hyperpure eliminates middlemen by purchasing produce directly from farmers and selling it to restaurants at lower rates. This allows the company to obtain bulk orders from restaurants, resulting in a higher profit margin.
- Blinkit: Zomato recently ventured into quick commerce by acquiring Grofers and rebranding it as Blinkit. Leveraging data from Zomato’s food delivery operations, Blinkit efficiently opened dark stores, experienced remarkable growth, and eventually became profitable.
- Better Services: Zomato worked hard to speed up delivery and offer superior services compared to its competitors, allowing it to retain customers.
Zomato’s success in achieving profitability serves as a valuable lesson for the entire Indian startup ecosystem, the majority of which is still operating at a loss. It took Zomato nearly a decade to become profitable, despite facing cash crunches numerous times. Today, it stands as an inspiration for all of us.