Zomato claims profitability, fires on rival Swiggy with zero commission for restaurants

Looks like Zomato has upped its ante in the online food ordering space. Gurugram-based foodtech behemoth has announced a commission-free campaign for its restaurant partners and declared that it has turned profitable in throughout the 24 countries where it operates.

The company has, however, laid down some criteria to qualify for its zero commission campaign. Some of the criteria include the number of orders you process with Zomato on a weekly basis and overall consumer experience with the particular restaurant.

“Our core advertising business in India, South-East Asia, and the Middle East - the three key regions for us, is generating enough cash to cover for the millions of dollars of investments we are making into the rest of the regions, and our new businesses (like online food ordering, table reservations, Zomato Gold, Zomato Base, etc.),” mentions Deepinder Goyal in a blogpost.

According to the company's blogpost, 70% of its restaurant partner base qualifies for “#MissionGiveBack” that includes a zero commission campaign.

“We are rolling out a token of appreciation for restaurant owners and small business owners on our food ordering network in India. What’s that? Zero commission for all food orders placed through Zomato,” adds the blogpost.

The zero commission campaign is a direct assault on its closest competitor Swiggy, which charges 25-30 per cent commission from restaurant partners for every order. The move will prompt many restaurants (who weren’t part of Zomato) to get on board the company.

Swiggy’s revenue per order comprises of commission it charges from restaurants, a delivery fee charged from consumers and discretionary advertising revenue.

Meanwhile, common restaurant partners (who work with Swiggy, Foodpanda etc.) will prefer to work with Zomato as it allows them to keep the entire profit.

Earlier today, Deepak Gulati, who had joined Zomato as chief operating officer in March this year, resigned from the company. Last week, the company acquired hyperlocal logistics startup Runnr in an all-stock deal.

The Gurugram-based unicorn had hit 3 million orders a month last month while its competitor Swiggy does a little over three million orders in a month.

With the zero commission model for restaurant partners, Zomato is going to build pressure on Swiggy. Importantly, the Sequoia-funded company can sustain without charging commission as it is generating consistent revenue from the advertising business. Going forward, it would be interesting to see how Swiggy reacts to the development.