Zomato to exit 200-plus cities; this is what the company said

Food delivery and restaurant discovery platform Zomato spun off around 225 smaller cities last month, the company said in its December quarter earnings report. “Recently, in January, we exited ~225 smaller cities that contributed 0.3% of our GOV in Q3FY23. The performance of these cities has not been very encouraging in the past few quarters and we have not felt the payback period on our investments . was acceptable in these cities,” Zomato CFO Akshant Goyal said in the company’s shareholder letter.

According to Zomato’s annual report for 2021-22 released in August last year, the food ordering and delivery business was present in more than 1,000 cities.

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Rejection started after Diwali

“We have seen a slowdown in the food delivery industry since late October (after the festival of Diwali). This trend has been seen across the country, but more so in the top 8 cities. As a result, GOV growth in food delivery in Q3FY23 was only 0.7 % QoQ in an otherwise seasonally strong quarter. Orders fell QoQ while AOV grew. On a YoY basis, GOV grew 21% driven by order volume growth of 14% along with 6% growth in AOV,” Goyal said in the letter.

Zomato’s GOV – the total monetary value of orders including tax, customer delivery charges, gross of all discounts, excluding tips – for its food delivery business was almost flat, growing just 0.7% quarter-on-quarter to Rs 6,680 crore for the December term.

Earlier this week, the Gurugram-based company reported that its consolidated revenue grew 75% to Rs 1,948 crore in the October-December quarter, even as its loss jumped five times to Rs 346 crore. This includes the figures for its rapid trading business Blinkit and business-to-business vertical Hyperpure. On a year-over-year basis, the company’s adjusted food delivery revenue for the three-month period ended Dec. 31 saw a 30% increase, but saw a decline on a sequential basis.

The worst may be over

In the shareholder letter, Goyal added: “It remains a challenging demand environment, but we are seeing green shoots of demand coming back in recent weeks, leading us to believe that the worst may be behind us.”

“We believe that the long-term opportunity remains large and exciting. We think that the current slowdown is the result of a few temporary factors – a) macro slowdown for the mid-market segment, b) boom in dining out for the premium end, and c ) boom in travel at the premium end,” CEO Deepinder Goyal said.