zomato Business Model – How does zomato make money

What would you have done ten years ago if you wanted to have some restaurant food? Like anyone else you would have to get ready and go to the restaurant, you want to have the meals you craved for. If you wanted to eat the same food at your home then you had to order a takeaway. Now switch back to the current world. A lot has changed, isn’t it? You don’t have to go to a restaurant to get your favorite food. You can just simply order the food and get it delivered to your home. And how do you do that? It’s quite easy all you have to do is download a food delivery application, choose the item from the menu of the restaurant you like and place an order. That’s if your order will be delivered to your home and you can enjoy your food.

If you are a millennial and you live in a city on your own then you will be definitely using one of these applications. Because these are lifesavers for a lot of people who are working hard and do not have the time to cook a meal for themselves when they get to their homes. One can just order and enjoy their meals. Not only that but these applications also don’t charge hefty delivery fees so it is not much of a bad deal for the people who are ordering through them. Moreover, it saves them a lot of time and energy that they would spend if they go to a restaurant by themselves. There are quite a few food delivery applications that are in the market today. But this article is about the business model of Zomato which is a popular food delivery service in India and other countries.

What is Zomato?

Before getting to know the business model of Zomato and how it makes money it is better to know something about the company itself. As mentioned earlier Zomato is a food delivery service in India that has gained a lot of popularity over the years. This food delivery service was founded in the year 2008 by Pankaj Chaddah and Deepinder Goyal. It all started when Deepinder Goyal was working at a company and found that it was extremely difficult to know what to order for lunch as he didn’t know what items were served at which restaurants. So he started taking photos of the menus of various restaurants and sharing them with his colleagues. He found that it was quite helpful not only to order lunches but every other meal. By looking at this he thought there was a business opportunity in it and wanted to start a company. 

After that Pankaj Chaddah joined to help him. Together they started this company in 2008. But during that time it was not known as Zomato. During the first couple of years, the company was known as Foodiebay. It was in 2010 that the name was changed to Zomato. After this, the company started to get good responses from the people of Delhi where it was founded. So the company started expanding to other cities. Soon the company expanded to big cities in India like Bangalore, Pune, Mumbai, and Kolkata. Now Zomato is present in all the major cities in India. Not only that but it also started expanding its services to popular towns. But if you think that it is only popular in India then you are wrong. It has been very successful in expanding its business to other countries like the USA, UK, UAE, Sri Lanka, Canada, and several others. 

The business model of Zomato

Since Zomato is a food delivery service its business model is going to be a bit similar to the business model of other food delivery services like Deliveroo or Swiggy which is another food delivery service that was started in and a fierce rival of Zomato. You can also check out the business model of Swiggy on Zeen. Coming back to the topic Zomato has become more diverse over the years. It has found more ways to grow its business and reach out to more people. So let’s look at the most important aspects of their business model.

Restaurants

If you launch a food delivery service then you know how important restaurants are to your business. You have to partner with almost all the major restaurants small and big that are present in the city. Especially when you have other food delivery services to compete with. So Zomato partners with the restaurants to provide the people with all the choices they wish for. Not only that but Zomato also provides the restaurants with the technology they require to receive orders.

The restaurants also benefit from the Zomato as their restaurants receive free promotions through the applications in the regions that they are present at. This is especially helpful for smaller restaurants that are not very popular or the restaurants that are newly opened. Zomato helps them reach more customers. They will be selling more food than usual if they partner with restaurants which is exactly what the company wants. 

Customers acquisition

Getting customers is the most important thing for a business to become successful. This is something everyone knows. But if you are a company take is new in the market then you have to use various strategies to get more customers in less time. Especially it is a challenging task in India as the people have never seen anything like Zomato before it was launched. So Zomato focused aggressively on promotions during its initial days.

To get people to use the application it has used the most common but effective strategy that is offering discounts. It started out giving ridiculous offers on foods from their favorite restaurants and it worked. People liked the idea of ordering food from home. It is still using the same strategy to reach new customers. This has helped the business to expand to more countries to offer their services.

Delivery Partners

Delivery partners are one of the main reasons for the success of the company. When it comes to ordering food online people expect it to be quick. Maybe not as quick as a pizza delivery but quick nonetheless. If they fail to do this then people may order food from other food delivery applications. So you need delivery partners who will deliver the food who are quick enough to reach the customers after the order has been handed over to them. The delivery partners are also paid good money to do their jobs. Zomato also has a rating system through which you can rate their delivery partners. Getting a five-star rating will help them earn a few extra bucks. Not only that it also allows you to give them some tips using their application which will be added to their pay.

How does Zomato make money?

In the beginning, Zomato was only an application for listing restaurants but it has definitely changed over the years. There are more than a few ways in which Zomato earns money these days. Let’s go through them one by one.

Restaurant advertising

A restaurant may reach more customers through Zomato but it will not be shown as the first one on the list unless you pay for it. Many people don’t know this but the restaurants have to pay the application if they want to get viewed as soon as the application is opened. They do this because their restaurants will be getting the preference and their menu will more likely be viewed by the customers. It is a great deal for big restaurants to get more sales and newer restaurants to reach customers. Zomato makes a good amount of money through restaurant advertisements.

Food delivery

This is a no brainer. You can understand that the main source of its revenue comes from food delivery since it is an online food delivery service. Zomato charges a commission from both the restaurants and customers. The restaurants pay Zomato based on the number of orders they get. This commission is shared between the company and delivery partners. It also earns money from customers as it charges them some delivery fees. This delivery fee is increased during the time of rain or other occasions where demand is very high. 

Subscription

Zomato also earns money from it subscription program. The subscription program of Zomato is called Zomato Gold. This subscription is available for both restaurants and customers. After paying the subscription fee the customers will have access to the Zomato Gold Loyalty program. By subscribing to this program the customer gets exclusive discounts and offers that are not available for regular customers. 

Live Events

This is one of the latest ways in which the company started to earn some of its revenue. They started organizing live events to reach out to more people. The event is called Zomaland which is basically a food festival along with other things organized by Zomato. Here people can enjoy different kinds of food from all over India and also witness performances by music artists and other people. It was started last year and it has been very successful. Zomato charges an entrance fee to the people who want to attend the event.

Grocery delivery

This is a fairly new addition to the platform and it has been received well by the customers. It was very helpful to the people during this COVID times. 

Conclusion

This is the business model of Zomato. It is one of the popular food delivery application in the world at the moment. It has managed to do all of it in the last decade and it is still going strong. Check out other articles on Zeen about other business models. You can check out the business model of Xiaomi if you want to know how it became the third-largest mobile manufacturer

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