Imagine that you are the owner of a company that is growing
every day. Your revenue is increasing every day, and success is kissing your
feet everything is going very fortunate. There is only one competitor left in
the market. And the wait is there for the IPO huge IPO arrives listing gains of
56% to all investors and in a certain time stock price gets doubled but
suddenly, you come to know that the losses of your company have increased so
much that at any point of time, you may become bankrupt. If all these things
happen to you then what will happen to you?
ZOMATO - The company whose IPO came out very loudly if you
look at the figures, Since last 3 years this company is in very severe losses.
In 2019, 964 crores, In 2020, 2367 crores, Or finally in
2021, 812 crores
15 November 2021, The share price of Zomato is 160 Rs. was at his all time high the people who
invested money inside the IPO and sold the shares on time they made a lot of
profit. But what about the rest?
Because today the share price of Zomato has come below its
issue price. Now the question is, that if people were seeing so many losses of
the company from the beginning then why did people fiercely invest so much
money in this IPO?
After all, how did this happen to a great food delivery
startup like Zomato? Is Zomato going to be bankrupt? And most importantly,
What are the powerful business lessons that we can learn
from this case study and implement in our business?
ZOMATO It's complicated this is because even today most of
us know Zomato as a food delivery startup.
And this is the reason that we know so much about the
company. But not about the hyper local delivery ecosystem Zomato and infact Out
of all its competitors, not a single startup has ever been profitable till
date.
And there are very high chances,These startups will not be
profitable in the coming time as well.
But why, and if so, why are these investors pouring crores
of rupees into these startups?
Well, to understand this, it is very important for you to
understand about these 4 things.
No.1, What is zomato's business model?
No.2, What are the problems that are coming under the
delivery ecosystem at this time?
No.3, What were the future plans of the company that being
sold to the general public
No.4, and most importantly, What is the final game plan of
the company?
So in very simple words, Zomato generates revenue in these 6
ways
No.1, Delivery charges
No.2, Commission from restaurants
No.3, Advertising from restaurants
No.4, Subscriptions
No.5, Hyperpure
And last and most importantly, Consulting Services For
Restaur. In these 6 ways Zomato generates revenue at this time Zomato got 75%
jump in all its orders after Covid in 2021
This year is not over yet and Zomato has already doubled his
revenue from last year.
I know what you are thinking!! If this is the case then why
is the stock price falling on the daily basis? So now pay very close attention.
This is Zomato's unitechnomicz of the year 2021. In which it is shown to the
people, that even if the company is within the overall losses, but on per order
basis our Unitechnomicz is profitable. Seeing the thing, a lot of people
invested in its IPO.
But in the midst of all this,There was a lot of talk about
the hyper local food delivery space. Which till today is hidden from all of us
and that is, Dynamism of gig economy, Gig economy is one such economy,
Where people do not take permanent jobs, on contractual
basis or on freelance basis,work for different businesses. Ola, Uber, Swiggy,
Zomato, Dunzo, Blinkit all these companies either give you travel or hyperlocal
delivery services. Even if you move from one place to another through OLA, Or
you can get any food from the swiggy which is the final person that the service
is rendering to you. He is never an employee of these companies.
So in very simple words, It is the driver of Ola or the
delivery boy of Zomato, all these people are contract workers for these
companies. It's not their employees. Due to which these companies get these 3
very powerful advantages
No.1, No fixed liabilities These companies do not have any
liabilities on the side of these contract workers.
No.2, No Appraisals, Whenever you hire an employee, then
after some time you have to increase his salary, if the business is growing
then only. But in this case because these people are contract workers, their
salary is never increased.
And 3rd, No employees benefit expenses
Usually companies have to do a lot of expenses for
employees. Just like Insurance, Gratuity, Provident fund. Companies do not have
to do these things because the people who are working with them are their
contract workers. But due to this thing, where companies are sitting on one
side very powerful advantage. On the other hand, companies are facing a lot of
problems. Like if we talk only about hyperlocal delivery startups then, Even
there companies have to face these 2 major problems.
No.1, Unhappy Delivery Staff, After talking to a zomato's
delivery boy, we came to know that zomato delivery boys get money on the basis
of their target but, there's a cache so see how it work.
Every Zomato delivered boy gets paid for meeting their touch
points from restaurants to the customer's house it becomes 2 touchpoints If a
Zomato delivery boy wants to earn 200 rupees.
So he has to cross at least 24 touchpoints which is close to
12 deliveries
So, if someone wants to earn 500 rupees a day by becoming a
Zomato delivery boy then he has to do a minimum of 30 deliveries.
And that to if none of these orders get canceled then which
is Close To Impossible
I know what you are thinking, If so why is this Zomato
deliveries boy doing this work?
How do they earn their living? Well the reality is, most of
the delivery boys are alive on the Incentive Bonuses. Suppose if you have met
one of your particular target
For an example, A zomato delivery boy, Crosses the target of
Rs 240 for the day of his earnings after that he is given a bonus of 80 rupees.
But the truth in this is that the incentive bonus will be given to him only when
he remains logged in till 11 o'clock in the night and will work till 11
o'clock. What actually happens is that it looks like a very good and profitable
deal from above. But the reality is that just to earn a bonus of Rs.300.
A zomato boy has to burn petrol worth a minimum of 200 rs. But
there is a very big problem inside this system which all the delivery boys are
facing at this time. Which most people don't even know
So basically, Zomato pays its deliveries boy Rs 4 per
kilometer to travel. So for an example, the distance from restaurants to the
customer's house is 5 km. The thing for which Zomato delivery boy will get 20
Rs. This thing looks fine but the biggest problem comes when a Zomato delivery
boy operates inside Tier 2 and Tier 3 cities. Because the restaurants inside
such cases are not present inside the local areas. In most Tier 2 Tier 3
cities, these restaurants are a bit far from those local areas.
Now in this case now the Zomato delivery boy first travels
from his local areas to another local area, for which he has to travel around 4
km. After that he will pick up the food from that restaurant and deliver it to
your home. Whose distance is 5 kms and finally after delivering the food at
your home he will come back to his local area whose distance is 4 kms. In total
one zomato delivery boy has traveled about 4+4+5 i.e. 13 kms
But you know what!!
Zomato will give only 5 kms money to the delivery boy. Why,
because according to Zomato the distance from restaurants to the customer's
house is only and only 5 km and there is no earning of zomato delivery boy in
such case. And it's nothing, Zomato Delivery Boys Use Google Maps To Trace
Customers' Location. But Google Maps doesn't show the exact location. In most
of the cases happens is that the Zomato delivery boy reaches the location, calls
the customer, and the customer calls him somewhere else. Due to which 20 to 30
min. of delivery boy gets spoiled easily and let's say this happens in just 6
deliveries.
Within 1 day, the delivery boy's 3 hours were wasted in the
same way. And on top of it, From Petrol to Maintanance, from Toll fees to food
all these expenses have to be paid by a Zomato boy from his pocket.
So now comes the second problem, Which is Exit Barrier
Swiggy and Zomato both these companies have taken 10 minutes delivery startup
to fight Zepto
But there is a cache, Where Zepto needs to open dark stores
to expand itself At the same time, Swiggy and Zomato need not only to open dark
stores.
Rather, money has to be spent to maintain their food
delivery space as well. Which is basically, Zepto will always have more money
than these companies to expand itself moreover,where Zepto is focused only on
Quick Commerce
At the same time, Swiggy and Zomato cannot focus on quick
commerce except their food deliveries space.
Why, They have invested a lot of money in their food
delivery space the reason for this is that they have a very strong exit barrier
in front of them. So basically, To Survive in the Quick Commerce Space these
Companies Have Only 2 Ways
Delivery in 10 minutes is not an easy thing due to which all
these companies have to open their dark store in between 1 to 1.5 kilometres.
If they want to reduce the delivery time and at the same
time to ensure the safety of their delivery partner, So these companies will
have to open a dark store within 1 to 1.5 kms. Something that costs a lot of
money
And No.2, Exploit the workers, Which is already doing these
companies. I know what you are thinking, If a Delivery Startup is in Loss all
delivery partners are upset with all these delivery startups. But in spite of
knowing all these things,
Why did people invest money in the IPO of these companies?
Well one reason, Hype, But this hype is not because of the
branding of Zomato rather, the future plans that were told to the people were
made because of him.
The company was in huge losses what almost everyone knew. But
these two things were kept in front of the people. And these things were
marketed in a way you can't even imagine
No.1, Hyperpure, What will make Zomato will work on Farm to
Fork model?
That is, from the farm to the fork, the whole supply chain
will be controlled. And along with this, Zomato will also open many cloud
kitchens. But it's too late to be in this thing
And No.2, Strengthen The Unit Economics, People were told
that even though we are still in Losses. But in the coming time we will
definitely be profitable. By strengthening our unit economics
But if these companies want to strengthen their unit
economics, So they have only 3 ways
No.1, Increase Commissions, Increase commission from
restaurants, automatically unit economics will be strengthened but in this case
there is a very high chances that many platforms after delisting themselves
from these restaurant will come with
their own applications
Or some other competitor comes in the market and shifts over
it.
No.2, Reduce Workers Pay
Cut the money of all the delivery partners you have but by
doing this, delivery partners will also start abandoning all these platforms.
And 3rd, and most dangerous Price To Discount Illusion
What is being done with people even today I'll explain you
with an example,
Where I live there is a restaurant near my house
"Al-Nawab" Which sells very good biryani and I eat it regularly from
there. Now look at this very very carefully
Al-Nawab Restaurant, This is the actual menu of Al-Nawab Restaurant
where Half plate Biryani is listed at Rs.80
This biryani is listed above Zomato, know how much Rs. 160.
Moreover, if i order from zomato and i want extra gravy
So i have to pay extra for gravy too whereas if I buy
directly from a restaurant, So I don't have to pay extra for any gravy.
On top of that, This restaurant is just 2 kms from my house
the thing for which Zomato charges very heavy delivery charges from me
On the other hand, If I order directly from the restaurant then
I don't need to pay any delivery charges.
Everything is in front of you If i order my biryani from
Al-nawab through zomato and that too after applying 60% discount coupon Even
then I will have to pay a minimum cost of Rs 170-180 for this biryani.
On the other hand, I can contact to al-Nawab and bring it
for 130 rupees. And more importantly, where I have to wait for at least 40
minutes to eat after ordering from zomato
At the same time by calling al-Nawab directly. I can place
this order in just 15 to 20 minutes
So, In very simple words, The discount given on all these
platforms is not a discount, is rather an illusion.
In simple words, there is a risk Whether it is Swiggy-Zomato
or Ola-Uber,
Most of the Big Economy Startups Are Trying to Change the
Consumer Behavior of All of Us and yes they are successful. Today there is
hardly anyone who would think of going to a restaurant to pick up their food.
But, You know what!!
None of us are attached to Swiggy or Zomato Rather, we are
attached to the discounts given by these people. That is, if a person is getting
more discount on Swiggy, So he will order from Swiggy. If he is getting it from
Zomato, then he will do it from Zomato. As of today customer is not related to
any company.
So in simple words, None of us is attached to the brands but
the discounts they offer
Which in reality is a deception Consumer awareness is
increasing day by day and as soon as a new competitor comes in the market
Very high chances, from delivery partners to customers everyone
will leave these startups and shift towards that competitor.
But the question is, knowing all this why all investors are
giving crores rupees to these startups
Why did the Zomato-Blinkit deal happen? Well, Let me tell
you there is such a game plan behind all these things that people like you and
me are not even aware of.
And that is, GMV Pumping Evaluation of startups not on the
basis of their profits, rather it happens on the basis of their GMV
It means, Gross Merchandise Value In very simple words, revenue
Year 2021, Zepto arrived and quick commerce started in India
before Zepto, neither Swiggy nor Zomato were in a hurry to deliver in 10
minutes.
Then what suddenly changed, That all these people except the
food delivery startup segment are now paying so much attention to the quick
commerce segment. And this is the place: from where the concept of GMV begins
If You Observe Too Closely before the entry of Quick
Commerce segment, when Swiggy and Zomato used to do food delivery only, average
order value size was at that time, 250-350 rupees
But as soon as they enter Quick Commerce, their average
order value size has increased to Rs 600 to 900. Whether profit or not by
taking entry in Quick Commerce
But the average order value size has increased due to which
the company's revenue has started increasing automatically. And as a result, as
revenue gets pumped up, valuation gets pumped up automatically. So in best
case, The investors who are there, they will sell their stack to the rest of
the new investors, Or to the general public like you and me and all this brings
us to the most important thing what powerful lessons is that,
What we can learn from this case study and implement in our
life
First lesson, Learn to read the sides, Whenever you are
investing wherever you are so you always explore all the sides of that thing
Because, In 99.9% of the cases, You will be shown the side
of the investment that you like best
After reading in the news that this startup has been
evaluated for so many crores, never invest in these startups rather, Dig down
and do your own research
Along with this, you also talk to those people who are
associated with these startup: Because from there you will know the truth, which
is not being told to you.
2nd Lesson, Question everything and repeat, a startup is
raising funding, raising why After all, what is he going to do with the
funding?
Do startups need to raise funding?
A startup is buying out another startup why doing this? After
all, what is there with this deal that we are not being told? Question each and
everything.
Because while doing this, you will not only get to know the
things that are being hidden from you inside this process. But you also have to
know about all those things who no one knows
Every company has secrets, and some such secrets are also
inside the Tata Group. The Tata group has such a company, about which the rest
of the people leave it, even the Tata group itself does not talk. But this is
the only company that gives such a powerful advantage to the Tata Group. Which
any other business group does not have. Which is that company??
After all, what are the secrets hidden inside the company?
If you click here, then you will know.
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