The expansion into grocery delivery was always seen as a way of re-optimizing the food delivery fleet in non-peak hours, but the entry into the restaurant SaaS segment could likely turn into a market share battle amongst Swiggy and Zomato, experts told FE.

The Indian food delivery industry, which is expected to breach the $ 10 billion GMV mark by 2025, is once again going through a major shift in strategy. The two market leaders – Swiggy and Zomato – who virtually command a duopoly are targeting a new segment that could eventually dictate their future market shares.

Post pandemic, India’s restaurant industry has shown renewed interest in investing in software tools and tech products that help complement their revenue. Restaurants are tapping on SaaS-based CRM tools, inventory management software, reservation automation tools, and point of sale (PoS) solutions, in an effort to drive up demand that they lost during the pandemic.

Although software tools like CRM and inventory management have largely been utilized by large organized restaurant chains, post-pandemic, even smaller unorganized restaurants have begun to adopt software tools. Nevertheless, experts indicate that the need for restaurant SaaS tools did arise alongside the advent of food delivery apps themselves.

“Restaurants usually list on multiple food platforms, and each platform has its own backend software. On peak or high demand timings, it would have been difficult to manage orders from multiple platforms, and hence there was a need for a separate software platform that would aggregate all this live order on a single dashboard, making it easier for restaurant owners to manage orders. That’s where the need for restaurant SaaS began in the Indian context, ”said Rohan Aggarwal, associate partner, RedSeer, a consultancy firm that advises foodtech firms.

Industry estimates suggest that currently both Swiggy and Zomato process around 1.5 million orders on a daily basis, even after having spread out food delivery operations in more than 500 cities including in smaller tier towns. However, these numbers still do not translate to meaningful profits, hence both Swiggy and Zomato had early on experimented with grocery delivery to chase additional revenue. Swiggy currently clocks 1 million orders on its Instamart quick commerce service, while Zomato has already begun talks to merge with 10-minute grocery delivery app Blinkit (formerly Grofers).

The expansion into grocery delivery was always seen as a way of re-optimizing the food delivery fleet in non-peak hours, but the entry into the restaurant SaaS segment could likely turn into a market share battle amongst Swiggy and Zomato, experts told FE.

“Foodtech companies are not only viewed as food delivery companies only, but also as a last-mile convenience and logistics provider. Hence, it makes logical sense to for them to invest in businesses other than food deliveries, especially considering that they are creating a foray into hyperlocal deliveries. Moving into online restaurant reservations, PoS and Saas platform through M & As could be a good option for food delivery players as it could help ensure quality delivery along with a seamless customer experience. However, it is crucial that food companies understand the complexity of operations and work on core levers to drive efficiencies, so as to be able to maximize benefits and be able to provide quality deliveries, ”said Harsha Razdan, partner and head, consumer markets and Internet business, KPMG in India.

Incidentally, Zomato, originally launched in 2008 as a restaurant discovery platform that aggregated information such as menus, dishes, and user reviews, did not get into food delivery until 2015. In fact, in FY20, Zomato’s primary revenue source included ad sales, food delivery, ordering and Zomato Pro subscriptions. For its next leg of growth, Zomato is now doubling down as a direct service provider for restaurants by offering online discovery, table booking, cloud kitchen infrastructure and B2B raw material supply for restaurants.

Zomato has also made multiple acquisitions in the SaaS segment and most recently it paid $ 5 million in cash to acquire restaurant management platform UrbanPiper for a 5% stake in the company, as a part of a larger $ 24 million round. Swiggy is also reportedly in talks to acquire PoS software provider Dineout in a $ 25-50 million deal. Dineout is one of the current leaders in the online restaurant reservation space and also offers SaaS tools. The deal could likely provide Swiggy with enough manpower and the tech stack required to break into the restaurant SaaS space.

Speaking to FE, Dineout’s CEO and founder Ankit Mehrotra said that currently every category of restaurants including pubs, cloud and QSR kitchens have turned to SaaS to better manage day-to-day operations. One of the most demanded SaaS products post-pandemic is Dineout’s CRM and online marketing tool, Mehrotra said.

Presently, more than 20,000 restaurants are registered on Dineout’s online reservation tool, which has doubled when compared to 2020, Mehrotra said. “Our consumer base has more than tripled because after the pandemic the consumption rate for dine-in has skyrocketed to more than what we had prior to the pandemic. It’s a clear indication of a revenge dine-in trend. In February 2020, prior to Covid, we had around 2.2-2.5 million reservations a month on the platform, but this now gone up to 6.5 million as of February 2022, ”added Mehrotra

Apart from this, Dineout has also witnessed a major shift in demand patterns with Tier-2 cities growing at a much faster rate. Mehrotra pointed out that the average transaction value (ATV) has gone up per reservation from Rs 1,000-1,500 as of February 2020 to around Rs 2,000- 2,500 currently in tier-2 and smaller cities. In tier-1 and metro cities, the ATV is up from Rs 2,000-2,200 to Rs 2,500-3,000 currently. These numbers do clearly indicate a growing market opportunity for expanding into the restaurant software management space, and both Swiggy and Zomato may want to have the early-mover advantage.


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