For a lot of us, between 25 & 35, Zomato was that seminal startup that we look towards as the flag bearer for our generation. After the success of Naukri, Shaadi and a whole host of other companies — from what could be collectively called internet 1.0 — it was Zomato that we could all really associate with. Between them, Facebook and Instagram, everyone became either a food critic or an entrepreneur. This was us:
I could go on but since we all have such refined palates, we decided to look at how the industry is changing and in what direction.
With each subsequent time period, customers are getting more comfortable ordering higher values and amounts of food online. The implications of this trend on the economics for delivery and revenues for aggregators are compelling, not just because it signals a growing trend but also because it signals a growing reliance.
Collectively & by implication, Average Order Values (AOVs) for the sector are also growing:
Order frequency in the sector is also correspondingly increasing:
As long as your taste vs. price vs. quantity trade off makes sense, food is one of the few sectors that promises startups of all sizes, the opportunity to make money.
- If you are a small kitchen, the aggregators will bring you orders.
- If you’re an aggregator then not only is there advertising money to be made but over time — you can open your own private label and own the entire value chain.
- If all you do is handle delivery (why though?) then you could shave off a few dollars in labour arbitrage.
It makes sense that people keep innovating in this sector; there’s enough room to grow and a customer at every price point.
In my view, our greatest limitation is that we only serve ‘people like us’ and haven’t bothered to look at more price sensitive food markets where the simple introduction of hygiene and standardization backed by the economies of scale could be disruptive.
Thanks for your time,
Ashish
- Team KG
