After claiming to witness 50 per cent month-on-month growth from online ordering business, Gurgaon-based restaurant information portal Zomato has shut operations in four cities, as order volume in these cities failed to pick up.
The cities where it has decided to stop services are Lucknow, Kochi, Indore, and Coimbatore.
Zomato launched its online food ordering business in April last year, allowing its users to order food online from restaurants using the Zomato app, and had since expanded this offering to 14 cities across India. Some earlier claims by the company stated that in less than a year of operations, its ordering business has grown 50% month-on-month.
“The size of the market is in these cities is small right now and is growing with time. We will re-launch when the time is right. In the meanwhile, we will continue to offer the best content (including scanned menus) to ensure that foodies are able to find and order great food,” Pankaj Chaddah, Co-founder, Zomato, who is leading the online ordering business for Zomato, said in an official release.
“The combined order volume in these four cities accounted for less than 2% of Zomato’s total order volumes.Despite our recent marketing efforts, including television ads, these cities didn’t see a significant increase in the order volumes,” he added.
Overall, Zomato’s online order volume is growing at a healthy 40% month-on-month. Less than 5% of Zomato’s orders are discounted, making Zomato one of the few tech startups to not use negative gross margins to grow the business, the company claimed in an official release.
In December last year, Zomato had planned to invest USD40 million in its food-ordering business to capture a dominant chunk of the market in India and the United Arab Emirates (UAE). It also said that the company will achieve operational break-even in ordering business by March this year.
Read: Zomato goes aggresive on food ordering business, to invest USD 40 mn
It appears that taking a cue from the failure of few food tech startups in the past, the existing majors in this segment(online food retail and services startup) are working toward creating a sustainable and profitable business model, as against burning cash in customer acquisition, discounts and expansion.
Recently, hyperlocal grocery delivery firm Grofers also shut operations in nine cities after the cities failed to achieve enough sales. Grofer’s competitor Peppertap also said that their current focus is on consolidating their businesses rather than expansion.