Gurgaon-based restaurant listing and services company Zomato, the most prominent food-tech venture in the country, is shutting down its online food ordering service in four cities — Lucknow, Kochi, Indore, and Coimbatore, reflecting the state of still nascent consumer internet business in the country.
Zomato that competes with Foodpanda among others in the online ordering of food from restaurants, attributed the decision to the lack of scale in these markets.
Pankaj Chaddah, co-founder, Zomato, who is leading the online ordering business for the firm, said: “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.”
“Despite Zomato’s recent marketing efforts, including television ads, it didn’t see a significant increase in the order volumes in these few cities. These smaller cities are not yet entirely ready for the online food ordering business, but once they are, Zomato will reconsider its strategy,” he added.
Zomato launched its online food ordering business in April 2015, allowing its users to order food online from restaurants using the Zomato app, and had since expanded this offering to 14 cities across India.
The combined order volume in these four cities accounted for less than 2 per cent of Zomato’s total order volumes. Overall, Zomato’s online order volume is growing at a healthy 40 per cent month-on-month. Less than 5 per cent of Zomato’s orders are discounted, making Zomato one of the few tech startups to not use negative gross margins to grow the business, it said.
It claims to have 75,000 restaurants listed on its platform in India. Zomato also works with delivery partners Grab and Delhivery to offer delivery from restaurants which do not otherwise deliver food.
Zomato recently introduced an in-app chat support feature, enabling consumers to chat with the team at Zomato for any order-related queries. This feature is currently available to users in India and UAE.
The development comes exactly a week after the Gurgaon-based hyperlocal food delivery platform Grofers decided to shut down its services in nine cities. Grofers cited “not much uptake even after running massive marketing campaigns” as a major reason to withdraw its operations from the nine cities.