Zomato introduces self-pickup service to rein in costs

Zomato introduces self-pickup service to rein in costs
Photo Credit: Photo Credit: Shah Junaid/VCCircle
10 Oct, 2018

Restaurant reservation and food ordering platform Zomato has introduced a self-pickup service in 13 cities, a move that seems to be aimed at enabling the Gurugram-based company to streamline costs in its delivery operations.

Users can place an order at a restaurant of their choice via the app and can pick it up from the eatery after it is processed, the company said in a blog post.

Called ‘Zomato Pickup,’ the service will help the company reduce its reliance on delivery personnel who fulfil 9 out of 10 orders on the platform. The service is prepaid for now.

Typically, Zomato pays each delivery personnel Rs 20,000, which includes commissions. By comparison, new entrants like UberEats and Ola-owned Foodpanda pay their delivery associates a premium, with a monthly compensation of Rs 30,000 or more in metro cities like Mumbai, an industry observer told TechCircle.

“Zomato Pickup follows a separate commission structure and does not impact the commission charged for food delivery," said Mohit Gupta, chief executive of food delivery at Zomato. He did not specify the exact commission structure. The company charges 7% commission from restaurant partners on each order, excluding charges for delivery and the payment gateway, according to recent reports.

In a separate blog written earlier in October, CEO Deepinder Goyal stated that the total number of delivery staff employed by the company, directly and indirectly, stood at 74,000 across 38 cities in India.

“By increasing the proportion of self-delivered orders, we have been able to favourably control and impact the overall customer experience. The average time taken to deliver an order has come down from 39 minutes to 33 minutes in this time period,” said Goyal in his blog.

The current move creates another channel for Zomato to incentivise customers to order through its app in lieu of benefits such as special offers by restaurants or loyalty rewards in the form of Piggybank coins.

For Zomato, increasing transactions through its platform becomes critical ahead of a $400-million extended funding round, which is expected to value the company at $1.8-2 billion. The round has seen interest from investors like Ctrip from China, SoftBank Group and existing investor Ant Financial.

The company has managed to reduce its losses to Rs 106.3 crore for the financial year 2017-18 from Rs 390 crore in year prior.

It had also acquired Bengaluru-based enterprise catering aggregator Tonguestun in September.

Zomato is locked in a fierce battle for market share with Naspers-backed Swiggy. Unlike Zomato, the Bengaluru-based company's gets more value out of its delivery fleet because it also delivers groceries and now medicines.

Swiggy has raised $465 million so far with the recent round raised in June from Naspers and DST Global, which saw the firm aiming for unicorn status.