The meal delivery sector in India is a duopoly, with Zomato and Swiggy holding the majority of the market. This duopoly is not only strengthening its stronghold in the food delivery industry, but it is also aiming to expand beyond delivery.
We highlighted the three primary pillars that generate Zomato’s income — Food Delivery, Dining Out, and Sustainability — in one of our blogs on Zomato’s business model, as well as the company’s future plans to establish additional core sectors.
In this blog, we will look at the various business sectors Swiggy has established since its inception in 2014 to have a better understanding of Swiggy’s business strategy, but first, let’s learn about Swiggy’s origin story to set the stage.
In this blog, we will look at the various business sectors Swiggy has established since its inception in 2014 to gain a better understanding of how it makes money, but first, let’s learn about Swiggy’s origin story to set the stage.
Swiggy’s Beginnings
Swiggy is well-known for its food delivery service, although the startup’s parent firm, Bundl, was originally focused on e-commerce logistics. Bundl was founded by Sriharsha Majety and Nandan Reddy with the intention of creating a business that would combine technological jobs and offline occupations.
“We felt we’d discover that competitive advantage by being more than just a pure software firm or a pure offline company,” Sriharsha explained in an interview with YourStory.
The logistics and shipping sector within the e-commerce industry was unstructured at the time, so the two founders decided to target that market.
It wasn’t easy, though, because they couldn’t locate a technological partner. Because no one was interested in joining their company, they were obliged to employ a contractor to create the product.
However, by the time they released the product, the market dynamics had shifted, with corporations such as Flipkart and eBay shipping things themselves.
“That’s when we realised we needed to shift our focus, and the opportunity cost wasn’t worth it.” “Thankfully, we didn’t have any employees, investors, or obligations at the time,” Sriharsha said of their choice to shut down Bundl a year after they began working on it.
Following Bundl’s demise, the two founders reflected on what the unsuccessful venture had taught them. Recognizing the logistics industry’s lack of technological proficiency, they founded Swiggy, a company that would operate at the crossroads of technology and logistics.
Swiggy entered the food tech business at a time when the industry was experiencing a boom. New businesses, such as TinyOwl and Foodpanda, were rapidly developing, supported by investors looking to profit from the impending food tech revolution. At the same time, Zomato was already the undisputed leader in the food tech business, despite the fact that it was merely a restaurant discovery platform at the time.
TinyOwl and Foodpanda were bought a few years later, in 2016, after failing to scale successfully on their own. Other food-tech firms failed as well, but Swiggy, like Zomato, managed to scale and stay afloat in the thick of it all.
So, what made Swiggy different from other firms that launched around the same time, and how did it survive the food tech slaughter of 2016? The answer lies in Swiggy’s pursuit of scale.
Swiggy’s strategy included establishing product-market fit in a local geographic region before expanding its presence elsewhere. Swiggy fulfilled 1000 orders each day in its first year, however, the majority of these came from Bangalore.
Swiggy grew 2x following that, with the rate of growth accelerating after its $2 million seed round. Swiggy secured another $16.5 million round in a matter of months as it began to onboard delivery employees, allowing Swiggy to have greater control over the user experience. Swiggy was processing 70k orders per month by mid-2015.
Swiggy only expanded to 7 cities after receiving money, adhering to Peter Theil’s dictum of “monopolise a market before scaling.” TinyOwl, on the other hand, was already present in 18 cities. Swiggy’s deliberate expansion approach, on the other hand, gave it an advantage in the long run.
TinyOwl was later bought by Runnr, and Swiggy continues to develop as a result of its deliberate scaling, raising another $35 million round in January 2016.
The epidemic had a negative impact on daily delivery counts. Swiggy, on the other hand, was able to maintain its current advantage. According to a DNA study from May 2021, Swiggy was handling 1.5 million daily orders, 0.3 million more than Zomato’s 1.2 million.
Swiggy expanded its objectives beyond food delivery by using its expertise in logistics and delivery. Swiggy had mastered the use case of food delivery. The same infrastructure might be expanded to meet people’s daily grocery needs or to deliver anything they wanted from point A to point B.
In August 2020, the business will also launch Instamart, a quick grocery delivery service that will use a network of dark storefronts. Swiggy also launched another service, Swiggy Go (now Swiggy Genie), in the same year, via which users may have almost anything delivered from one location to another.
Swiggy’s food delivery business has grown rapidly, and the company’s attempt to expand into logistics has resulted in the development and discontinuation of various services, including Swiggy Pop (a single-serve meal option for students and office workers) and Swiggy Daily (home-cooked meal delivery services).
Swiggy also embraced the cloud kitchen trend in 2017, launching Swiggy Access. The company launched self-run virtual kitchens and assisted other restaurants in launching their own cloud cooking facilities. Despite the fact that Swiggy’s cloud kitchen section showed positive prospects, the pandemic forced the company to close three-fourths of its cloud kitchens.
Swiggy, along with Zomato, is already one of the leaders in the food-tech market as of 2021, with the ability to profit from its delivery infrastructure even more in the future.
Swiggy’s Business Plan
Swiggy presently generates revenue from the six business categories listed below: food delivery, Swiggy app advertising, Swiggy Access Cloud Kitchens, Swiggy One Subscription, Instacart (Swiggy’s Grocery & Other Household Goods Store), and Swiggy Genie ( Package Pick & Drop Service ).
Let’s look at each of these pieces separately to get a better understanding of them.
Food Distribution
Swiggy charges both hungry clients and eateries in exchange for acting as a middleman.
Restaurants are often charged a 22 percent – 25 percent commission on the order bill amount, the percentage of which fluctuates depending on a variety of criteria such as the number of orders received, restaurant location, commission imposed by competitors, and so on.
In order to entice eateries to list exclusively on Swiggy, the company offers a 2-3% discount on the food delivery commission.
Swiggy does not have a minimum order value for customers, which increases the logistical cost of every order.
As a result, once the company had established a strong presence in the food delivery industry, it began charging clients a modest delivery fee, which is based on the order quantity.
Swiggy even charges a surge fee to customers in specific areas at times of high demand, special occasions, and midnight delivery.
Advertising
Swiggy, like its competitor Zomato, generates revenue by selling the attention gathered on its app to restaurants looking to market themselves.
Swiggy enables two types of advertising across its web and app properties: higher priority restaurant listings and banner advertisements.
Swiggy Entry ( Swiggy Operated Cloud Kitchens )
Swiggy introduced Access in November 2017, a service that houses various restaurant partners under a Swiggy-operated central delivery kitchen facility in order to enable partners to expand into neighborhoods where they do not already operate.
The benefit of joining Access for partner restaurants is that Swiggy does not charge them rent or deposits, allowing them to save up to 25% on their operational costs.
Restaurant partners, on the other hand, must pay a greater commission for food delivery than establishments that use the standard marketplace model.
Aside from restaurant partners, the central kitchen also houses Swiggy-branded items. Consider the approach similar to Amazon’s online marketplace, which not only hosts vendors but also sells things under its own brand name.
Swiggy Access uses technology in a unique way, as explained by In an interview with YourStory, Vishal Bhatia, the head of Access, stated,
“One thing that helped us was that we spent a lot of time evaluating and analyzing demand in certain places.” As a result, we ensure that the partners move to the appropriate locations. We also conduct extensive research before establishing a Swiggy Access kitchen in a specific location.
The site is chosen solely on the basis of hyper-local demand. As a result, even if we relocate the kitchen a few kilometers away, the entire demand profile transforms. Then we apply our knowledge in selecting the ideal partners based on the kind of cuisines that will do well.
Once the partner is in the kitchen, we concentrate on getting them ready for operations. We also invest in IoTs, which help to reduce partner expenses such as gasoline and electricity use. As time goes on, we will invest more to assist partner operations.”
Swiggy Access had expanded to a 1000-kitchen facility by November 2019, housing 150+ restaurant partners and 400+ establishments. However, as previously said, the pandemic led Swiggy to reduce its cloud kitchen network by three-fourths.
Swiggy One
Swiggy Super is a subscription package that provides subscribers with unlimited free restaurant meal delivery on purchases above Rs 199, unlimited free delivery on Instamart orders over Rs 99, and 10% off delivery fees over Rs 35 for Swiggy Genie, and other savings. At the time of writing, the service costs Rs 75 per month.
As previously stated, Instamart and Swiggy Genie are both Swiggy’s attempts to expand from food delivery to delivery of anything. Swiggy’s supermarket and daily necessary delivery service called Instamart, while Swiggy Genie allows consumers to have anything delivered from one location to another. Delivery costs are how both of these firms earn money.
Swiggy Earnings and Profitability
Swiggy’s income in FY20 was Rs Rs 2,696 crore, more than doubling the 1,128.3 crores it made in FY19.
55.7 percent (Rs 1501.8 crores) of revenue came from restaurant service fees, 20.2 percent (Rs 545.7 crores) from customer delivery fees, 15 percent (Rs 405.1 crore) from the sale of other food products, including private label cloud kitchens, 6.7 percent (179.7 crores) from advertisements, and the remaining 2.4 percent (63.7 crores) from other sources.
55.7 percent (Rs 1501.8 crores) of revenue came from restaurant service fees, 20.2 percent (Rs 545.7 crores) from customer delivery fees, 15 percent (Rs 405.1 crore) from the sale of other food products, including private label cloud kitchens, 6.7 percent (179.7 crores) from advertisements, and the remaining 2.4 percent (63.7 crores) from other sources.
Swiggy’s revenue growth from FY19 to FY20 was segment-by-segment as follows:
Swiggy, on the other hand, spent Rs 6864.1 crores in FY20 to make Rs 2,986 crores, resulting in a net loss of Rs 3908. Swiggy’s FY20 losses were compared to FY20 losses.
Swiggy was valued at $5.5 billion following its previous $1.25 billion fundraising round in July 2021.
