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Indian food-tech market shows signs of a slowdown

All food-delivery companies have reduced giving discounts.

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The USD 2-billion Indian food tech market may be slowing down as major players clamp down on offers and discounts, coupled with the ongoing slowdown in India’s consumer spends.

According to a report by local media Economic Times, the monthly order growth across the sector fell to 1 to 2% between August and October across the sector.

The combined orders from the top three food delivery companies—Swiggy, Zomato, and Uber Eats—had risen to 3 million in June from 1.82 million in January this year. However, since then total order numbers have remained flat between 3.2 million and  3.4 million a day, the report said citing investors, analysts, and company executives.

At present, Zomato claims to receive 1.25 to 1.3 million orders per day, while Swiggy pegs this number between 1.4 to 1.6 million. UberEats, on its part, caters 400,000 to 600,000 orders per day.

As per the industry estimates, in 2018,  the food delivery industry saw 15 million customers and 640 million annual orders worth USD 2 billion. This market is expected to grow to USD 15 billion by 2023.

Over the last one year, the food delivery players had stepped on the gas and poured in money in areas such as promotions and discounts. As a result, Swiggy which was clocking about 700,000 orders a day in September 2018 doubled that number to about 1.5 million daily orders in October this year.  Zomato grew equally aggressively in the same period, doubling orders from 500,000 per day to 1.25 million per day.

However, with the food tech companies shifting their focus on narrowing losses, the dynamics of the industry seems to be changing.

Zomato, for instance, has more than halved its cash burn to under USD 20 million a month, from USD 45 million in March, the report said, while Swiggy’s cash burn on the food delivery business ranges between USD 30 to USD 35 million, which it plans to cut down soon.

“At Swiggy, UberEats, and Zomato, the focus is on cutting mounting losses and stepping up monetization, even if that comes at the cost of slowing orders,” the report said quoting multiple people in the know of the matter. “Fluctuations in orders are now largely due to increased orders during weekends, discounts, city launches, and growth driven by exclusive tie-ups. Food ordering also goes through seasonal changes and this is a period of dip typically.”

All three players, the report said, are expecting a surge in orders during the time of Christmas and New Year’s, followed by a weak January opening. This comes as Amazon gears up to launch its food delivery app sometime during Christmas, which may make the game a tad tougher for the incumbents.