Clearly missed out a 4th risk for Zomato, ONDC. This is starting to look very interesting. I had Initially felt that ONDC will find it difficult to gain share vs incumbents with the simple thought: how can you disrupt something that is already not making money by offering worse service and even lower prices? However that seems to be exactly what is happening.
The economics of Zomato were discussed above. It currently makes Rs 20/order (contribution) after having a take rate of 23% (17% from the restaurant and 6% from the customer). I dont completely understand the ONDC economics, but it seems restaurant commissions are 4-8% and the restaurant is also funding free delivery at the moment (lets assume Rs45/order, or ~10%). So total restaurant outgo is 14-18%, similar with the aggregators. In addition, the network is funding a Rs 50 discount with each order. The big difference is that the customer, who was already deriving the most benefit from the aggregators by being severely under-monetized is now effectively being paid to order from ONDC (no delivery fee, discounts, cheaper goods). In effect this is the customer acquisition cost, but instead of being borne completely by the aggregator, it is now being shared by the restaurants and the ONDC network (and maybe the logistics partners).
This is obviously completely unsustainable, but can still cause disruption in the marketplace. We effectively have a third competitor. And it is growing really rapidly albeit of a low base (1k to 10k orders/day growth in a couple of weeks). At the moment, a lot of data points are missing. For eg, what kind of warchest does the network have to continue funding these Rs 50/order discounts? What is the actual delivery cost and is the logistics partner also subsidizing the network? However, the restaurants clearly have an incentive to see ONDC succeeding as it will lead to elimination of platform power (exactly the goal of ONDC).
At the moment I dont have enough data to exit, but am keenly watching developments with an open mind. My excitement on Zomato/Swiggy had already gotten tempered when more scuttlebutt revealed that restaurants (even the big chains like McDonalds, KFC,etc) dont actually make money of home delivery orders via aggregators. Thus really everybody is unhappy: restaurants, delivery partners and the platform which is not making money. The only satisfied person is the customer because he is being severely undercharged. We saw movement toward charging the customer more in the recent quarter by Swiggy but ONDC is likely to reverse that.
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