Zomato was founded as a food aggregator in 2008. And if there is one big valuable asset of an aggregator in any field it is their data. So let's look at how Zomato is on its route to utilizing this data and aims to be profitable in the future in today's pill.
To understand the power of an aggregator, let's rewind to 2016, and let us introduce you to June - a company that had launched a revolutionary convection oven with features like app-connectivity, Wi-Fi-enabled, ALEXA enabled, all in all, it was way ahead of its time. Its product was listed on Amazon as most other company does. and Guess what? Amazon came up with an oven of their in-house brand with the same features, priced it very aggressively, and using its digital power ranked it high on searches.
In such cases aggregator such as Amazon has full access to sellers profile, their product specifications, and also the customer reviews, using which they can come with an "in-house" product with revamped features and more importantly aggressive pricing. Now if you look closely the only reason an aggregator could do that is by using harnessing the power of data. If this case study is clear let's now look at Zomato's situation.
Zomato as an aggregator
In Zomato's case, it has all the information about the restaurant like prices of particular dish across all the sellers, which person likes what dish, which area has maximum demand for a particular dish. All of which if combined can be a game-changer for Zomato.
You Ask How?
Let me introduce you to a concept called cloud kitchen. Put it simply, it is a restaurant just without the seating space and Zomato has already ventured into this space with the launch of Zomato Kitchen. Where a traditional restaurant will take years to break even (Cost recovered), a cloud kitchen can do it in months. The cost benefits are insane of a cloud kitchen, but...but....but...what Zomato is building is a 'SUPER CLOUD KITCHEN'.
Where on one side Cloud kitchens like Behrouz Biryani and Faasos (both are listed on Zomato) individually bring about 16-17 crore of business per month, while on the other a 'SUPER CLOUD KITCHEN' is a collection of different restaurants under one roof. For example, assume Dominos Pizza, Pizza Hut, and Ovenstory all operate in a single kitchen, imagine the kind of profit the company running these brands would be making since they will be saving on real estate costs.
The X Factor
Cloud Kitchens like Behrouz Biryani and Faasos have to pay aggregators like Zomato a commission to be able to run their businesses, also a proper raw material supply chain is quite challenging but Zomato hyperpure, an initiative by the company to provide fresh, hygienic, high-quality ingredients and supplies to restaurants can be used if Zomato goes live with this 'SUPER CLOUD KITCHEN'. Also given that it itself is an aggregator it doesn't have to pay commission to anyone.
Zomato has all the weapons in its arsenal like the data, digital supremacy, hyperpure, and kitchen. What now remains is How soon Zomato can turn profitable and stand true to its valuation. Do you have Zomato shares in your portfolio? if not Will you add them?
Do let us know your thoughts on the above topic in the comment section and let a healthy conversation begin.
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The above information is to spread financial literacy. We are not SEBI registered financial advisors, kindly consult your financial advisor before making any investment decision.