Zomato makes a Pivot

Zomato makes a Pivot

When life gives you lemons, make lemonade; they say.

Foodie Bay was a company that started its journey listing restaurants. After raising money from Infoedge, the parent company of Naukri, the company rebranded itself as Zomato. The company stayed true to its cause listing restaurants and making their menu available for people to determine where they would want to go eat. The company charged a subscription fee from the listed restaurants to be visible on the app.

This was good until Swiggy showed up. Within a year the company was forced to pivot to include delivery. This changed the dynamics of the business and a company that was headed towards international expansion was dragged into a competitive cash-burning turf war. To make matters worse, Uber entered the market as well with UberEats making life that much more difficult for Zomato.

Zomato Gold

To be able to compete better (additional revenue channel) and encourage more loyalty, Zomato launched Gold and also on-boarded several Gold Partner Restaurants who provided special offers to the Gold members.

This was immediately panned by several restaurants who were part of the program, who called for a boycott over deep discounting which they claimed was hurting their business. This hurt Zomato’s image. The company also got embroiled in a religious sentiment issue which resulted in the #logout campaign against the company.

Unquestionably, last year has not been easy for the company.

New Beginning

2020 began with the company announcing the acquisition of UberEats, where Uber got 10% of Zomato. The acquisition was justified with a gain of customers and strength in markets where they had been weaker vis-a-vis UberEats.

And then CoronaVirus arrived!

The response that has come from Zomato is nothing short of a masterstroke. They are going to kill two birds with one stone.

Every restaurant in the country is bleeding money and suffering losses. The rents and other obligations will not stop, but at the same time, footfalls have ground to a halt over the last week. Some skeletal delivery requirements are coming, but I am sure it is nothing close to what it used to be. Many of them have shut operations.

Now, Zomato has also been looking to pivot into the fintech business on the consumer side for a long time and the current situation has left the door wide open for them to do the same on the restaurant side. Finance on the B2B side can be very lucrative.

Zomato announced that they will be offering loans to their Gold Partners. Why? Well, they have all the data on the earnings that these outlets have and they also have the ability to drive sales if needed. Further, they would seamlessly make a pivot into the finance side of the food business, without even an NBFC certificate.

This makes the Gold Partnership valuable for the restaurants who are a part of the program because this is acting as insurance for them. All the complaints against the Gold Partner Program should be put to rest. Also, the current circumstances give the company leverage to negotiate with the government on behalf of these restaurants. Well, they have put their money where their mouth is.

On the one hand, the company got into the finance business and at the same time, it made its Gold Partner Program far more powerful.

Most would have seen this situation as a calamity but Zomato is teaching us a lesson in what might be possible during a calamity!

Vivek Srinivasan

Co-Founder, Startups Club Traveller, Thinker, Writer, Doer

This Post Has One Comment

  1. Nalin vyas

    This was so insightful. I’m not a voracious reader but came here as it was written by Vivek. Now I need more of these market learning based articles by him.

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