Zomato is planning to shut its newly launched grocery delivery service, Zomato Market, said two sources aware of the development. This comes as a surprise as the foodtech unicorn was on its way to expand the grocery delivery operations and recently announced that it is available in 80 plus cities in India.
“It’s quite surprising, but the company has started downscaling the grocery delivery service in many cities, especially smaller ones,” said one of the sources on condition of anonymity. “Facilitating delivery (food, grocery etc.) is a cash-guzzling business where every player has been losing money on each delivery. The decision seems to be in line with controlling burn and focus on core business.”
Zomato Market was expected to be a counter-attack from the Ant Financial-backed firm for its arch-rival Swiggy, which has been doing grocery delivery for over 12 months. Besides, expanding the grocery delivery service was a part of the company’s plan to compensate for the sharp fall in business during the lockdown period.
Not only grocery, Swiggy and Zomato have also started home delivery of alcohol in select states. According to the industry’s estimate, both food delivery platforms have been facing a 70-80% drop in the number of orders over two months.
The Ken first reported Zomato’s U-turn from the grocery vertical in its newsletter. Responding to Entrackr’s queries, Zomato said, “Zomato Market will continue to operate and service users who need on-demand delivery of essentials. However, as the country opens up basis Unlock 1.0 relaxations, we are going to spend a large proportion of our time making our food delivery service the safest, and the most loved one in town.”
It’s worth noting that Zomato and Grofers also held merger talks. However, there is no further update on the discussion, and it looks like it didn’t move beyond the preliminary stage. Entrackr had exclusively reported the merger talks in April.
Since Covid-19 has disrupted the company’s operations by a large margin, the company will have to wait and work hard to reach to pre-crisis scale in its core business ~ food delivery. Taking steps to extend the runway, Zomato also laid off 13% of its workforce and slashed salaries of senior employees.
As far as grocery is concerned, Zomato was not a new entrant during the lockdown period. Sensing a right timing to enter the segment, Meesho and Cure.Fit started offering groceries early this year. Over two dozens of startups also started grocery, but most of them are likely to withdraw it as lockdown gets relaxed.