In race to deliver profits, here's how Swiggy beat Zomato
Food and grocery delivery platform Swiggy has been on a profitability quest for a while. The company has finally found something to rejoice in. Its food delivery business turned profitable in the March quarter, said co-founder and CEO Sriharsha Majety in a blog post. Let's see what worked for Swiggy that led it to deliver profits and taste success ahead of its rivals.
Why does this story matter?
India's food delivery scene is dominated by Swiggy and Zomato. However, the former has been struggling with cash burn. In FY22, it burnt about Rs. 3,900 crore. To make matters worse, despite the cash burn, Swiggy still lags behind Zomato in market share. Profitability in the food delivery business will help take some heat off the company.
Swiggy did not factor ESOP costs in calculating profitability
"Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than nine years since its inception," Majety said. The company, however, did not include employee stock option (ESOP) costs in calculating profitability. Profitability in the food delivery business takes it past rival Zomato. Interestingly, Zomato is set to announce its Q4FY23 and full-year results tomorrow.
The company fired 380 employees this year
Start-up funding has been on a decline since 2022 due to macroeconomic headwinds. This prompted start-ups worldwide to reduce their costs. Swiggy, known for its high operational cost, has taken multiple measures to bring down its cash burn recently. In January this year, the company fired 380 employees as part of a restructuring exercise. It was aimed at rationalizing its business.
Swiggy's monthly cash burn has declined
Swiggy's cost-cutting measures do not end there. In March, the company sold Swiggy Access, its cloud kitchen business, in a share swap deal to Kitchens@. According to Moneycontrol, the firm's monthly cash burn has come down to Rs. 165.15 crore from around Rs. 400 crore during its peak in 2021. This has certainly helped the company.
Customer retention, focus on Tier 2 and 3 cities helped
Swiggy's focus on customer retention paid off, Majety said. The company's activities in non-major cities also helped in becoming profitable. "We continue to make strides in gaining customer favor, including strong traction in Tier 2 and 3 markets," he added.
Swiggy is still in losses at the company level
It is only Swiggy's food delivery business that turned profitable. The company as a whole is still in losses. Instamart, its quick commerce platform, is one of the chief reasons behind this. Majety, however, said the company is behind its peak investment days. According to him, Instamart will hit "contribution neutrality" in the next few weeks.
