No More Zomato Delivery In 225 Cities, Says “Not Very Encouraging” Performance

Zomato has faced extreme losses as per its quarter three financial earning report. The company has announced that it has ceased operations in 225 smaller cities as the performance of these cities was ‘not very encouraging’. According to the report, the company suffered a loss of worth of Rs 346.6 crore for the quarter that ended in December due to the reduction in the food delivery business.

On Monday (Feb 13), shares of Zomato opened at Rs 53, which is slightly lower than the last of Rs 53.30 on Friday (Feb 10).

Zomato Quarter 3 report

Taking notes from the Q3 report, the company said, “The current slowdown in demand was unexpected, which is impacting the growth in food delivery profits. But despite that, we think we are in a good position to meet our profitability goal.”

‘Gold Subscription’

Recently, Zomato, which is one of the most-used food delivery apps in India, has launched its Gold subscription in order to boost the company’s profits. The official said, “We launched a brand-new membership program, Zomato Gold, in late January… We expect this program to drive loyalty and higher frequency of ordering going forward.”

The company’s decision to pull out of 225 small cities comes at a time when it is planning to hire people for around 800 roles.

Zomato CEO, Deepinder Goyal has offered a glimmer of hope to the working population after announcing that Zomato is looking to hire for around 800 roles. He posted several job vacancies on LinkedIn. However, in one of the posts, the requirement was to ‘work 24*7 with no work-life balance. The post faced backlash from people on LinkedIn.

In Zomato’s letter to the shareholder, CFO Akshant Goyal said, “Recently, in January, we have exited around 225 smaller cities which contributed 0.3% of our GOV (gross order value) in Q3FY23 (October-December).”

As per the annual report of the food delivery firm, Zomato was operational in more than 1,000 cities. Therefore, the listed food delivery giant has decreased its geographical presence by around 23% in the country.

The company’s CFO, Goyal said, “Performance of these (225) cities was not very encouraging in the past few quarters and we did not feel the payback period on our investments in these cities was acceptable.” During the post-earning analyst’s call, he said that pulling out of these cities would not have a very material impact on the company’s operational costs.

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‘Industry-wide Slowdown’

Since last October, Zomata has attributed the loss in revenue to an ‘industry-wide slowdown’ in the food delivery industry. The official said that while the bearish trend was visible across the country, it was the most impactful in the top eight cities.

Meanwhile, Zomato’s gross order value for the food delivery business including the taxes, customer delivery charges, discounts etc, clocked in at Rs 6,680 crore for Q3FY23, a growth of 0.7 per cent sequentially.