Zomato Set to Capture 75% of Food Delivery Industry Profits, Overcome Competitors
Mumbai: Online food delivery platform Zomato is expected to capture over 75% of the industry's profits in the next few years, surpassing its nearest competitor Swiggy and leaving other players like Zepto, Dmart Ready, and BigBasket in its wake.
According to Ambit Asset Managers' monthly newsletter, replicating Zomato's cost-advantage model is challenging for competitors due to its significant market share and higher advertisement revenues. The asset manager has retained Zomato as one of its core holdings in its portfolios, citing its sustainable business model and superior customer insights.
Zomato's high average order value in food delivery and quick commerce makes it difficult for competitors to fully replicate the business model. While some players may try to copy Zomato's approach, they can only partially imitate it, according to Ambit Asset Managers. The asset manager also warned that chasing unprofitable market segments could derail businesses and hurt growth.
The newsletter also highlights Zomato's leadership in advertising, with a 58% market share in food delivery, giving it an edge over competitors. With this advantage, Zomato is likely to capture a significant portion of industry advertisement income. The asset manager has predicted that Zomato's market share in food delivery will grow beyond 60% in the next few years.
Competitors like Zepto are trying to compete with Zomato in quick commerce by offering discounts, but they face challenges due to higher customer acquisition costs, lack of synergy, and smaller scale. Dmart Ready has also chosen not to compete in the quick commerce convenience segment, focusing on delivering large baskets instead.
Meanwhile, Amazon and Walmart's foray into quick commerce is expected to be challenging, given their traditional e-commerce business models' struggle and exposure to regulatory risks as foreign-owned companies.
The outlook suggests that Zomato will continue to operate at a significant edge over its competitors in the food delivery industry, making it an attractive investment option.