Food delivery platform Zomato eyes a new 'District' with third super brand

In this regard, Zomato's strategy differs greatly from that of its unlisted rival, Swiggy, who is trying to integrate all of its offerings under one 'super app'

After building profitable businesses in food delivery and quick commerce, Zomato Chief Executive Officer (CEO) Deepinder Goyal is looking to get up his “third large business-to-consumer (B2C) business” through the newly announced “District” app, expected to be rolled out sometime in the coming weeks.

With the new vertical, Zomato is going after the largely unorganised live events and ticketing market.

“Zomato is building businesses that can operate independently of each other. This has the advantage that, should a particular vertical not bring in desired returns or hit the wall in terms of growth, Zomato will have other ‘unaffected’ businesses that can fuel growth,” said an e-commerce investor.

In this regard, Zomato’s strategy differs from that of its unlisted rival, Swiggy, which is trying to integrate all its offers under one “super app”. Swiggy’s approach allows the company to “cross-sell” its products across food delivery and quick commerce, which has been a challenge for Zomato, said the investor quoted above.

“Neither approach is right or wrong per se. It is more about which company is executing better. Zomato is showcasing its ability to execute well with its successful business verticals. The strategy is working well for them,” he said.

Zomato had, in the past, experimented with integrating its verticals under one app, as seen in the initial days of the Blinkit acquisition in 2022.

This, however, did not deliver desired results for the company, after which Blinkit was spun off into its own app.

According to Goyal, “District” will follow a similar approach, which allows for more “real estate” to add use cases via a separate app, rather than trying to fit new offers in a tab on the main Zomato app.

The going-out opportunity

Zomato last week announced it was acquiring Paytm Insider, the fintech major’s entertainment-ticketing business for Rs 2,000 crore.

“In line with this thinking and our belief around building ‘super brands’ (Zomato, Blinkit) as opposed to ‘super apps’, we think that a new brand will help customers build association with going-out use cases and also allow us to build a loyalty program which drives higher retention,” said Goyal in a recent letter to shareholders.

Zomato’s going-out business currently offers dine-out table bookings and a few live-ticketing events, whereas Paytm’s platform offers ticket bookings for movies, sports, and live events.

In FY24, the going-out vertical’s gross order value (GOV) stood at Rs 3,225 crore, growing at 136 per cent year-on-year (Y-o-Y).

In comparison, Paytm Insider reported a GOV of Rs 2,000 crore during the same period.

“(After) this acquisition, FY26 GOV (first full financial year after the acquisition) basis the business that we have today should be over Rs 10,000 crore,” Goyal said.

With the acquisition of Paytm Insider, Zomato would become the second-largest entertainment-ticketing platform in the country, behind only market leader Bookmyshow, which has a share of around 75 per cent in online ticketing. The company is profitable and posted revenues of Rs 976 crore in FY23.

With this, Zomato has the potential to become competitive in the entertainment and ticketing market. After the deal goes through sometime next month, Zomato’s going-out business may be able to improve its take rate from 8 per cent currently to as much as 12 per cent, according to analysts at Motilal Oswal.

Furthermore, the deal will enable Zomato to offer its customers a wide range of booking use cases spread across movie tickets, Indian Premier League tickets, dining-out table reservations, live entertainment and weekend getaways.

“Management’s strong demonstrated execution in the past and absence of meaningful organised competition (barring Bookmyshow) makes us believe Going-out could be the next big success out of Zomato,” analysts at JM Financial wrote in a paper.

Recreating Blinkit’s success

The new District app is likely to pose a different set of challenges than Zomato’s previous acquisitions, say investors. Eventual success will, nevertheless, depend on proper execution.

“Zomato initiated talks to acquire Blinkit when both companies were incurring significant losses. Zomato’s stocks were down and (its) investors were unhappy about the (Blinkit) deal. A lot of cash balance was spent on acquiring another large, loss-making business. However, the company’s management was able to execute very well and build Blinkit into what it is today,” said an investor who has sunk money in Zomato.

Zomato’s going-out business, in contrast, is profitable. The company has been in the ticketing business for more than a year now, and has been eyeing building more use-cases.

District is unlikely to move the needle for the firm’s overall business growth in the near term. However, Zomato’s vision of creating strong brands across food delivery, grocery, and going-out could make it a formidable platform in the long-term, say analysts at brokerage firm Motilal Oswal.

STRATEGY ON THE PLATE

- With District, Zomato is going after unorganised live events and ticketing market

- This differs from Swiggy, who is trying to integrate all of its offerings under one super app

- The food delivery firm last week acquired Paytm Insider to scale up its goingout business

- With the deal, Zomato is well positioned to take on market leader BookMyShow

- The firm is targeting a gross order value of over Rs 10,000 crore by FY26 for District