Zomato withdraws from 225 smaller cities due to lackluster performance in recent quarters
- ByStartupStory | February 11, 2023
Zomato, the food-delivery and restaurant discovery platform, announced in its Q3FY23 earnings report that it has withdrawn its services from 225 smaller cities in January. The company’s CFO, Akshant Goyal, stated in a letter to shareholders that these cities only contributed 0.3% to their gross order value in the October-December quarter.
In Zomato’s 2021-22 annual report released in August, the company stated that its food ordering and delivery services were available in over 1,000 cities. However, due to unsatisfactory performance in the past few quarters and an unacceptably long payback period on their investments, Zomato has withdrawn from 225 of these cities, according to the company’s CFO, Akshant Goyal.
During the post-earnings analyst call, the CEO, Goyal, was asked about the impact of the company’s withdrawal from certain cities on its costs. In response, he stated that the impact was “not very material.” The company, based in Gurugram, recently reported a 75% growth in consolidated revenue to Rs 1,948 crore in Q3, while the loss increased five times to Rs 346 crore. The report includes the performance of its quick-commerce brand Blinkit and its B2B vertical Hyperpure.
On a yearly basis, Zomato’s adjusted food delivery revenue for Q4 increased by 30%, however, it saw a decrease when compared to the previous quarter. In the December quarter, the company reported an adjusted revenue for food delivery of Rs 1,565 crore, compared to Rs 1,581 crore in Q3 and Rs 1,200 crore in the same period of the previous year. The company considers the adjusted revenue for the food business to be the revenue from operations plus customer delivery charges.
According to the company’s management, the decline in sequential revenue is attributed to a widespread slowdown in the food delivery industry since late October. Zomato reported that the trend was observed throughout the country, with a stronger impact in the top eight cities. In the December quarter, the Gross Order Value (GOV) for Zomato’s food delivery business, which includes taxes, customer delivery charges, and gross of all discounts excluding tips, only increased by 0.7% quarter-on-quarter to Rs 6,680 crore.
In the letter addressed to shareholders, Goyal mentioned that despite the challenging demand conditions, there have been recent signs of demand recovery in recent weeks, leading them to believe that the worst may be over.
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