Overview
Zomato's food delivery growth is slowing as the market matures and competition intensifies. The company reported negative quarterly order growth in Q1 FY25, a sharp reversal from the double-digit growth rates of just two years ago.
Three factors are at play: competition from Swiggy, quick commerce platforms like Blinkit and Zepto taking food delivery volume, and cost-conscious consumers shifting to smaller orders. Together, these are pressuring Zomato's unit economics and growth.
Quick Commerce Is Taking Over
Quick commerce is stealing food delivery volume. Blinkit, acquired by Zomato in early 2023, is now the better option for customers in major cities. They're choosing 10-minute ready-to-eat meals over waiting 30-45 minutes for restaurant orders.
Zomato's own Blinkit is now pulling volume away from its food delivery business. Customer expectations have shifted to 10 minutes for categories Zomato once owned.
It's a painful strategic trade-off: Zomato is cannibalizing its own volumes. The company has essentially accepted this loss and is redirecting resources toward quick commerce because the unit economics are simply better.
Average Order Value Declining
Average order value has dropped from ₹520-550 two years ago to ₹450-475 today. Discount competition with Swiggy and consumer price-consciousness are both at work. With inflation pressure on wallets, customers order less frequently and in smaller amounts.
Smaller orders are a profitability problem: fixed delivery costs stay the same, so they consume a bigger share of the order value. A ₹450 order that once generated ₹50-75 in contribution now barely covers delivery and overhead. Zomato is being forced to optimize for profitable orders rather than order growth.
The Delivery Cost Trap
Delivery partner management is crushing Zomato's margins. Fuel costs keep rising, partner turnover is high, and regulatory pressure on worker benefits keeps increasing. Operational fixes help but can only go so far. Delivery costs remain stubbornly high as a share of revenue.
Dark stores, bicycle couriers, demand pooling—Zomato has tried these but gains have been incremental. There's no silver bullet. Until the company finds a way to structurally lower delivery costs, profitability will stay under pressure.
| Metric | Zomato | Swiggy |
|---|---|---|
| Order Growth | -5% QoQ | -3% QoQ |
| Avg Order Value | ₹450 | ₹420 |
| Delivery Time | 15 min | 18 min |
| Market Share | 56% | 44% |
Profitability Will Take Longer
Zomato has reset expectations: sustainable food delivery profitability will take longer than previously promised. The company is now chasing efficiency metrics, not raw order growth. Market share matters less than profitable orders.
The outlook is modest growth ahead. Single-digit year-over-year order growth is likely. Zomato's focus is shifting toward cost management, unit economics, and using Blinkit to capture margin-rich food-adjacent sales.
Source: Company filings, Datum Intelligence analysis. This article is for informational purposes only and does not constitute investment advice.