The talks with its existing restaurant partners are in early stages and the plan is to introduce delivery of food within 10 minutes, they said.
“Zomato is introducing a sort of a marketplace where they are promising a 10-minute delivery,” said one of the people, who was approached by the company for the experiment. “That is something they will do through their own kitchens or warehouses.”
The company is likely to launch a pilot programme from April in a few cities, with Gurgaon likely being the first, the people said, speaking on the condition of anonymity since the experiment has not yet started.
Zomato did not respond to ET’s request for comment till press time Thursday.
“We have been approached by them (Zomato) to set up a kitchen alongside them … they are setting up these warehouses and giving ‘co-working’ style cooking stations to these brand owners,” said a senior executive at a cloud kitchen startup.
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Zomato briefly experimented with a 10-15-minute food delivery in four locations in Bengaluru last year, and the current rollout plan is being framed based on those learnings, according to an industry insider. It is working on a plan for instant delivery offering, internally keeping a target to deliver in under 20 minutes depending on the cuisine and location, the person said.
“…but they assume it will succeed only if delivery happens within 15 minutes maximum. They claimed 10 minutes delivery succeeded in the experiment,” said a third restaurant and cloud kitchen operator who has also been approached for the experiment.
The food-delivery company is exploring multiple models to do this, including utilising warehouses of its business-to-business supplies business for restaurant partners, called Hyperpure, or leasing out new facilities. It is also exploring models where restaurants could supply select menu items directly. After the December quarter, Zomato had said Hyperpure offered services in nine cities. It has increased its investment in the business since listing in July.
The discussions for instant delivery pilot come amid the company’s
commitment to shell out $400 million to grow the quick-commerce category in India and its
ongoing talks to merge with ultra-fast grocery delivery startup Blinkit, ET reported on March 15. The company also announced that it had
approved a plan to loan $150 million to Blinkit in phases.
Zomato’s investment of $5 million in Mukunda Foods, a food robotics company that designs and manufactures smart robotic equipment to automate food preparation for restaurants, is likely a strategic bet to scale ultra-fast deliveries.
“We will only invest in businesses which we see adding more than $10 billion to our market cap going forward,” founder Deepinder Goyal had said in an interview with ET in October last year.
Mukunda Foods has developed machinery which helps in standardisation of flavor and reduces cooking time 20-50% for Chinese and Indian cuisines, its cofounder Eshwar K Vikas told ET. He said he wasn’t aware of Zomato’s 10-minute food delivery plan.
On Thursday, Zomato’s shares closed 6.25% higher at Rs 80.70 on the BSE.
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Challenges
According to industry executives ET spoke to, the selection of items for the ultra-fast delivery category would be limited.
“They’re going to have more of a hub-and-spoke model where they will not have the entire cuisine category. Preparing good food and having it delivered in 10 minutes is a big challenge,” said a fourth executive, who said his company had preliminary discussions with Zomato for 10-minute food delivery.
For example, pizzeria and stand-alone outlets that deliver freshly prepared items take typically 12-18 minutes on average to prepare food. Cloud kitchen restaurants have a more robust selection of frozen, chilled, and ambient categories that are suitable for this model.
“Chilled and ambient food categories which include food items like a chilled parfait, oatmeal, poha, etc., are definitely ready for disruption,” according to an executive who has been approached for the experiment. He said such items account for only 15% of the total menu but contribute about 35% to the kitchen’s revenue.
“From a consumer point of view, it is going to be a stellar offering. Our delivery metrics are already under a lot of pressure even at 30 minutes. Customers are feeling that everything should be delivered in 15 minutes. Consumers are asking for it, and Zomato is reacting to it. I don’t know whether the selection can come through or not. I’m just not confident,” this executive said.
Ultra-fast delivery — or delivery in 10-30 minutes — has found a user base among convenience-seeking mid- to high-income households, looking for top-ups in categories like packaged foods, staples and other grocery items.
ETtechAccording to the people ET spoke to, Zomato was working closely with partners to finalise the contours of arrangement for quick delivery business, including the platform’s commission.
“Challenge here is quality and following standard operating procedures (SOPs) of multiple brands at one facility,” said a person. “How do you follow SOPs of multiple brands without any issues? It remains to be seen.”
Zomato’s third quarter results showed flat sequential growth for its food delivery business, as gross order value rose just 1.7%. Both Swiggy and Zomato reduced discounting in the October-December quarter which impacted growth, according to one of the investors of a food delivery company.
“Food delivery players have scaled up through the roofs in the last couple of years. However, with consumer confidence now bouncing back and restaurants reporting higher on-premise sales, demand is slightly muted in the short term. Tapping into newer delivery segments could help food delivery companies maximise returns from the fixed investment of delivery centres,” said Harsha Razdan, partner, consumer markets and internet business, KPMG in India.
People are looking for instant gratification and fresh food, said Ashutosh Sharma, research director at Forrester. “If you can deliver restaurant food in a short time and ensure its freshness in the process, there is a lot of value in it if you can make it happen,” he said, adding: “But the question is, can you make it happen?”
