Delivering On Demand—The Rise of Swiggy and Zomato in Manipal
A common sight in Manipal now is a sea of men in red and orange shirts waiting outside various restaurants to pick up orders. These men with Swiggy or Zomato emblazoned across their backs form the nexus of the growing food tech business that has taken over the town. Over the years, a number of businesses have cropped up in Manipal to serve the demands of the large student population. The introduction of Swiggy in November 2018 and Zomato in June 2018 adds to this list. As students enjoy the perks of having their favourite food easily available at their fingertips, eateries are learning to deal with a steady increase in deliveries. Slowly but surely, the restaurant business in this town is being affected by the entrance of these big players.
While food delivery services provided by restaurants were not uncommon, it was only in the latter half of the last decade that these restaurants began outsourcing delivery services to private enterprises like Swiggy, Zomato, and Foodpanda. The establishment of such businesses has provided easy access to a variety of meal options on a single website along with reliable and quick delivery services to those ordering in from the comfort of their homes. The recent introduction of Swiggy and Zomato to Manipal has been well-received by students and it seems to be a profitable strategic decision made by the businesses.
The Money and the Market
Taking into consideration the overwhelming student population in Manipal, setting shop in the neighbourhood was sure to boost revenue generation rates for the two companies. “Manipal is mostly a student town. Students who stay outside mostly order in and the students staying in the hostel tend to order from outside at least 2-3 times a week as well. Hence we found it to be a promising market”, said Swiggy manager Sharath Prabhu.
It is certain that the market does favour these businesses, and their effect on smaller local enterprises and other restaurants has not gone unnoticed. Chains, as well as independent enterprises, have quickly adopted food technology as a business strategy to increase publicity throughout the city. Catering to the young population, many restaurants feel that their names on the apps of these two food tech businesses will have a better reach as compared to the out-dated pamphlets that have been used until now.
As the target customers are mostly the tech-savvy younger generation in Manipal, the quality and efficiency of the businesses mobile applications would have to be accepted by the masses. A temporary glitch or lack of choices of restaurants in one app is sure to push customers to the next available app, shifting business towards the competitor. Srishti Agarwal, a student of MIT and a customer to both Zomato and Swiggy says, “I have both apps downloaded on my mobile, mostly as a backup. When one app doesn’t provide the necessary services, I usually switch over to the other one.”
With increasing competition between the two, it is not surprising to see a number of offers on the companies’ apps and websites wrestling for customers. While Zomato took the opportunity of the holiday season to introduce No Cooking December to their clientele, Swiggy’s 50% off on the first 5 orders continued to reel customers in and keep up the competition. “This is to drive the customers to our app initially. Over time we expect that the customers would stick along, getting used to the premium service. We would have offers once in a while as well”, said Sharath Prabhu.
Though there are many offers enjoyed by customers of both businesses, these apps can also pack in some hidden charges. Some restaurants list higher prices on one or more of these services as compared to their dine-in menu. The prices listed by Subway on Swiggy, for instance, are up to 10 rupees higher than those on Zomato and the restaurant itself, not including the additional packing and delivery charges. Both businesses have had their share of customer influx through their attractive offers with Swiggy taking the upper hand over Zomato in the food tech market, raising a total of $1.13 billion versus $410 million in funding.
As more people are opting to relish restaurant food in the comforts of their home, the share of revenue earned by restaurants from delivered food is on the rise. Delivery can help restaurants reach a wider customer base and expand into new markets. However, there is an attached cost. Restaurants have to pay a commission ranging from 10 to 40% of the order bill to the third party deliverers. In the long run, this may put a dent in a restaurant’s already slim profit margins.
Even with the high funding that these companies attract, most of them are focused on growth and are not yet profitable. The costs associated with a purely delivery based business are high and the returns low. Zomato, however, did claim that it turned profitable in September 2017 and as a result, moved to slash commissions for some of its restaurant partners. In July 2018, Swiggy and Zomato almost doubled the salaries of their delivery executives in a bid to retain their delivery fleets in the face of competition.
The Delivery Executives
Delivery executives from Zomato report that they receive 25 rupees per delivery, along with a bonus of 10 rupees if they are given a 5-star rating by the customer. While orders over a distance of 5 kilometres earn them extra payment, they are required to bear all petrol charges.
Swiggy follows an effort-based pay model. Delivery executives are paid according to the distance they travel and the time they spend on an order. Apart from their daily salaries, they have a daily earning incentive, a weekly login bonus, and a monthly joining/referral bonus. Health insurance up to three lakh rupees for the staff and their families is covered as well. Initially, due to high demand and a supply gap in hiring, Swiggy did not have sufficient delivery executives. Over time they have bridged the gap and currently have over 250 delivery partners. Arun Tendulkar, a student who worked at Swiggy, noted that there is a gap in demand and supply during the vacation months when there are few MAHE students in town. “In December, orders were very less and there were more delivery executives than required. We had to share orders amongst ourselves. Many times, I had to make return trips without an order in hand, which proved to be a loss for us,” he said.
Though the arrival of Swiggy and Zomato in Manipal has proved to be a welcome change for students, some of the restaurant owners were not aware of the food tech industry and were explained the advantages of the platform and how they could improve their businesses through such enterprises. A few of the restaurants in Manipal have weighed out the pros and cons that they face with regard to the same. Without expecting much profit, if any at all, they have partnered up with Swiggy and/or Zomato purely for the extra publicity they would receive.
“We want to be in the market at hand. When a new film releases everyone goes and watches the movie, similarly when Swiggy and Zomato come to Manipal everyone will want to get the apps and order from there. We want to increase our reach in the market,” said Sudhindra Prabhu, the owner of the restaurant Coast Asia. When asked about the disadvantages that may be faced by the partnership, Sudhindra Prabhu noted, “There are quite a few. We deliver our orders within 25-35 minutes of the customer ordering while food delivery services take up to 45 minutes. We also start receiving a bad name as the food delivery staff usually toss around the orders and we get calls from the customers complaining about the state of the food they received. Of course, there are advantages as well. They provide us with the manpower we need to deliver the orders when we don’t have enough people. Swiggy and Zomato have their own staff so it’s a hassle-free transaction. They provide us with people and we give them the orders.”
Popular eateries like Hadiqa and Dollop have also jumped onto the Swiggy and Zomato bandwagon. While they do have their own delivery staff, Swiggy and Zomato help in attracting more customers and simplifying the process since customers find it easier to order through apps. The discounts and offers that can be availed on both the apps often drives up the number of online delivery orders for the restaurant. According to Anil Pai, the restaurant manager, this has resulted in a slight decrease in the footfall of the restaurant. “They are changing the entire dining culture in Manipal. It first happened in Bengaluru and is now happening in Manipal as well. But the restaurants have to go with the flow. Swiggy and Zomato are both very professional in their business, and as such we cannot avoid this new change.”
Small-scale businesses like MFC and Silk Route have a different opinion on the larger food-tech enterprises. Both eateries have opted to partner with smaller food delivery businesses like Foodzapp, Foodzozo, and Foodzoned, which offer them lesser publicity. Silk Route, unlike most restaurants in Manipal, caters to a niche market of international students and finds the offers used by Swiggy and Zomato to be less affordable, as it would adversely affect their profit margins. MFC, who had a similar take on the business, added that due to revenue limitations and as they had already partnered with Foodzozo prior to the introduction of Swiggy and Zomato in Manipal, they found no need to switch to or partner with the larger businesses.
Not unlike other traditional forms of commerce, food has also begun to go the digital way. As food tech giants like Swiggy and Zomato make their presence felt in towns like Manipal, restaurants have been most affected by this change from business as usual. They have begun to adapt to this changing trend in the market, either voluntarily or involuntarily. The largest beneficiaries in this situation have been the customers, particularly students, whose response will continue to be the main factor in determining the fate of these companies in Manipal. Whether Swiggy and Zomato will truly prove to be a boon to the food culture in Manipal, remains to be seen.