Zomato’s revamped Gold membership program, which it rolled out in January, is showing initial signs of success, with the foodtech unicorn recovering some of the territory that it lost to its fiercest competitor, Swiggy.
Zomato has been able to cut into Swiggy’s market share in this quarter, according to a report published by HSBC Global Research. The report states that this was made possible by the introduction of Zomato Gold at an introductory price of Rs 149 for three months. (Q4FY23). “Thanks to the introduction of Zomato Gold, Zomato has begun to reclaim some of the market share that it lost in H2CY22. According to HSBC’s report, “We expect it to continue to gain market share from Swiggy, led by an aggressive go-to-market strategy.” [Citation needed] “We expect it to continue to gain market share from Swiggy.”
Zomato revealed in a previous announcement that it had increased its number of Gold subscribers by 9 lakh within one month of the relaunch. “The new Gold programme is constructed on top of what we have learned over the course of the previous few years – iterating on feedback we have received from customers, restaurant partners, as well as investors… In a letter to shareholders, CEO Deepinder Goyal stated that they anticipate this initiative will increase customer loyalty as well as the number of times customers place orders in the future.
According to HSBC, Zomato’s market share could approach 57% in FY24, which would be an increase of 13 percentage points over Swiggy since FY20. In other words, Zomato would pass Swiggy. The brokerage also anticipates that Zomato will absorb the effect of Gold benefits within the next few quarters, which will result in an improvement in the company’s EBITDA margins. HSBC reported that Swiggy continues to have a greater burn rate than its listed peer companies.
In addition, the brokerage anticipates that Zomato’s share price will increase by 64 percent from its present level to 87 rupees in the near future. In spite of the fact that the industry of food ordering is exhibiting symptoms of slowdown, particularly outside of the top 8 cities, HSBC anticipates that Zomato’s quick commerce vertical Blinkit will add value over the next one to two years.
According to estimates provided by HSBC, the present gross order value (GOV) run-rate for Blinkit, which is $1 billion, could easily double by FY25. “The Street continues to have a lack of appreciation for Blinkit. As a result of low market participation and increasing levels of competition, hyperlocal and Q-commerce are likely to experience rapid expansion over the next few years. According to the statement, “we see the potential for an improvement in profitability as well when the volume of sales goes up.”
