 "For a bigger share of the pie")
Even as bigger rivals in the online food aggregator space are facing the heat, a relatively small player, Swiggy, founded in August 2014, continues to attract fresh funding and is going ahead with its aggressive expansion plans. In the latest round of Series D funding, the online food-delivery platform raised $15 million led by Bessemer Venture Partners. The latest round of funding comes within nine months of its Series C funding of $35 million from Singapore-based RB Investments and New York-based Harmony Partners. With this additional $15 million, the total funds raised by Swiggy stand at $75.5 million.
Food delivery has proved to be a challenging business in India, mainly because of low average order value and high delivery costs. Since entry barriers in the online food aggregator space are low, the business saw a rush of players but a majority of them found it difficult to differentiate themselves. Many shut down or downsized operations as the flow of funds slowed down; some realised their business models were not sustainable and so they went for course correction. Players such as Dazo among others shut shop; Spoonjoy sold out; larger players like Zomato, TinyOwl and foodpanda scaled down their businesses.
Against that backdrop, can Swiggy build on its growth momentum? What lessons did it learn from the troubles of its compatriots?
The company says it has built its business on differentiation, customer loyalty, predictability and reliability of operations. All that thanks to a strong technology infrastructure. Take ordering. The company wants its first interface with the customer to be exemplary, so that there are fewer complaints and even fewer number of consumers dropping out after the first order.
So Swiggy has worked hard on its app making sure that a user can place an order in less than a minute. Swiggy has also introduced features like number masking and live tracking of orders online. Its app allows users to see the options most relevant to her on top of the mobile screen based on her past ordering patterns.
Then take the issues of predictability and reliability. This covers the whole gamut - from the quality of food, to the ease of ordering and timely delivery. This ensures the customer will come back for repeat orders. Its restaurant partners have tablets on which customer orders are relayed as soon as they hit the Swiggy dashboard. The tab makes tracking past order and financial information easier, which in which helps restaurant partners plan inventory better.
The reason to make that first point of contact impeccable is simple: As a co-founder of a start-up that shut shop says, "The higher your retention rate is, the lesser will be your spend on marketing. Keeping your existing customers happy helps lower customer acquisition costs and manage the unit-economics."
Swiggy has also stood out with its relentless focus is on innovation. This involves getting the right restaurants on board, offering curated menus and ensuring faster deliveries. Take a simple thing: to stay true to its motto of "no customer going hungry", the company has adopted a no minimum order policy. In other words, it promises to service every order, irrespective of the ticket size. "We have learnt that customers are willing to pay for quality service and discounting is not the only way to drive loyalty," says Majety. He adds that Swiggy has used technology as a key enabler, to form a strong backbone for its service and is working on deepening the integration with its restaurant partners to improve predictability.
A few issue in the food delivery business is logistics. Swiggy's delivery boys at the company are empowered with smartphones and the orders are assigned through a complex routing algorithm. That helps cut time and finally costs that get layered when route planning goes awry. One can also avail of the company's Swiggy Express service that ensures orders are delivered in 22 minutes flat. Without giving out specific numbers, Swiggy claims that its order count has grown 20 times in the past few months.
Going forward, the company has identified a few key areas where it plans to invest heavily. It will use the new funds to infuse quality talent in the organisation, improve customer experience, as well as get more restaurants on its platform. Swiggy also plans to look beyond its current business of aggregating and delivering food orders to customers. It is planning to introduce in-house cooking, which offers higher margins.
Food delivery has proved to be a challenging business in India, mainly because of low average order value and high delivery costs. Since entry barriers in the online food aggregator space are low, the business saw a rush of players but a majority of them found it difficult to differentiate themselves. Many shut down or downsized operations as the flow of funds slowed down; some realised their business models were not sustainable and so they went for course correction. Players such as Dazo among others shut shop; Spoonjoy sold out; larger players like Zomato, TinyOwl and foodpanda scaled down their businesses.
Against that backdrop, can Swiggy build on its growth momentum? What lessons did it learn from the troubles of its compatriots?
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"It is very important to strike a balance between growth and profitability. We have limited our cash burn and focused our attention on solving problems on the ground," says Sriharsha Majety, chief executive officer and co-founder, Swiggy. Currently, Swiggy is present across seven cities - Bengaluru, Kolkata, Hyderabad, Chennai, Mumbai, Pune and Delhi. It has 9,000 restaurants listed on its platform and has a fleet of 3,000 delivery boys.
The company says it has built its business on differentiation, customer loyalty, predictability and reliability of operations. All that thanks to a strong technology infrastructure. Take ordering. The company wants its first interface with the customer to be exemplary, so that there are fewer complaints and even fewer number of consumers dropping out after the first order.
So Swiggy has worked hard on its app making sure that a user can place an order in less than a minute. Swiggy has also introduced features like number masking and live tracking of orders online. Its app allows users to see the options most relevant to her on top of the mobile screen based on her past ordering patterns.
Then take the issues of predictability and reliability. This covers the whole gamut - from the quality of food, to the ease of ordering and timely delivery. This ensures the customer will come back for repeat orders. Its restaurant partners have tablets on which customer orders are relayed as soon as they hit the Swiggy dashboard. The tab makes tracking past order and financial information easier, which in which helps restaurant partners plan inventory better.
The reason to make that first point of contact impeccable is simple: As a co-founder of a start-up that shut shop says, "The higher your retention rate is, the lesser will be your spend on marketing. Keeping your existing customers happy helps lower customer acquisition costs and manage the unit-economics."
Swiggy has also stood out with its relentless focus is on innovation. This involves getting the right restaurants on board, offering curated menus and ensuring faster deliveries. Take a simple thing: to stay true to its motto of "no customer going hungry", the company has adopted a no minimum order policy. In other words, it promises to service every order, irrespective of the ticket size. "We have learnt that customers are willing to pay for quality service and discounting is not the only way to drive loyalty," says Majety. He adds that Swiggy has used technology as a key enabler, to form a strong backbone for its service and is working on deepening the integration with its restaurant partners to improve predictability.
A few issue in the food delivery business is logistics. Swiggy's delivery boys at the company are empowered with smartphones and the orders are assigned through a complex routing algorithm. That helps cut time and finally costs that get layered when route planning goes awry. One can also avail of the company's Swiggy Express service that ensures orders are delivered in 22 minutes flat. Without giving out specific numbers, Swiggy claims that its order count has grown 20 times in the past few months.
Going forward, the company has identified a few key areas where it plans to invest heavily. It will use the new funds to infuse quality talent in the organisation, improve customer experience, as well as get more restaurants on its platform. Swiggy also plans to look beyond its current business of aggregating and delivering food orders to customers. It is planning to introduce in-house cooking, which offers higher margins.
| STANDARDISATION IS KEY TO SUCCEED To be successful, food tech companies need to get the following right: |
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