As the online food delivery business in India continues to be a shady proposition and financial burn has piled up to $3 Bn of investors’ money in pursuit of market domination. Uber Eats decided to quit in India, to cut its global losses.
Uber Eats is the second victim of the price war in Indian food-tech after Food Panda, both have fallen behind to keep up with the competition. After over a year of looking for buyers and haggling overvaluation, a Gurgaon based firm, Zomato, finally acquired the Indian operations of Uber Eats in an all-stock deal worth of $350 million (Rs 2,485 Crore).
The acquisition of Uber Eats has left the market with a duopoly of Swiggy and Zomato. However, making profits still seems a distant realization. As per the annual report (year ended March 2019) of Zomato, its losses multiplied tenfold to Rs 10Bn ($141M), losing INR 25/per order whereas Swiggy incurs the losses of INR 23.6 BN, double to its revenue in the same period.
For Uber Eats, the late entry in the Indian market might be a disadvantageous factor, but its exit is more of a strategic failure. The market has accepted another late entrant in the online ordering space. Since the inception of its operations in 2014, Swiggy has made its way to a billion-dollar valuation in four years, forcing Zomato, started in 2008, to play as catch-up.
The willingness to buy the market share at the expense of current margins is not a new thing in Indian food tech. Uber Eats did what everyone was doing, to wage a price war and win the customer, and it worked too, and the food-delivery firm managed to acquire a 12% of the market share in India. However, Uber Eats could not be able to translate into an opportunity to build a brand in India.
As Uber Eats offered more discounts, customers demanded even more. Eventually, It became an easy and quick solution for Uber Eats to drive the operations. It is hard to win the customers loyalty in a segment in which there is no switching cost and customers are continuously looking for discounts.
On the other hand, Swiggy has focused on expansion and building a brand via prominent advertising on national TV. They have exponentially reduced discounts to focus on customer service and having the exclusive restaurants on board.
Zomato did well on the aspects like customer servicing and helping restaurants to build the brand. The company has focused on harnessing the power of the customer data to improve its offerings and have a user-friendly interface of its mobile application.
The other area where Uber Eats missed the opportunity is to build relationships with the relationships with restaurant partners. As per sources, Uber Eats hired third parties to manage the restaurant accounts. In the Indian market, most of the businesses are still driven on a relationship basis approach. Having a team that might have not actively worked on the ground to create business opportunities for Uber Eats. Uber Eats failed to empower and on-board the restaurant partners to build an exclusive offering. High commissions and low visibility has also forced the restaurants to switch their business on other platforms.
Zomato has given away 10% stock worth $300 Mn to buy a company that did not do well on any strategic aspect and failed to build a brand and customer portfolio. It might be another opportunity for Swiggy.
SOURAV RAINA 