Why Zomato and Swiggy are failing?

When a business can’t differentiate between Apple and Oranges, it eventually fails.

The above principle applies even more so in the service industry. The hair cut and shaving cannot be priced the same.

The share price of Zomato has fallen by half. The company is running in losses and is clueless about its Strategy. It is trying to rope in new customers by intensive marketing but is failing to keep existing customers.

To be fair to Zomato, its competitors are doing no better. They are in the same boat and suffering the same fate.

A long time ago I had written a post about blackberry and it turned out that they did follow my detailed advice but it was too late and it was in the wrong order.

Therefore I am only going to leave a few hints here.

Dishonesty:

These companies are selling food at a price higher than the price of the vendor. About 10% is added to the real price that shall be charged if you buy in person directly. This is dishonest as the company is not in the business of buying and selling. It must declare the real price. This is done mostly with small vendors and very well known vendors are kept out of this scam.

Disproportionate Charges.

You cannot charge Rs.70 for something which is less than that amount. It amounts to prescribing a minimum order value from the backdoor. Therefore it is uneconomical for a customer to buy a single item of small value. A person has to order many things so that the service charges are spread. It means a single person  needing just a small meal is shut out.

Losing business:

The real vendors send their own phone numbers or the number can be obtained easily and the persons who are shut out, as stated above, call directly to the vendor and order it. Both save money as vendors offer free delivery.

Minimum service charge:

Though Zomato does not disclose, Swiggy gives details of charges by disclosing that a minimum of Rs.30 shall be charged for three kilometres but it is false. Actually they are charging about Rs. 20  per kilometre starting with minimum 30. Sometimes, as today, they are asking Rs. 70 for a trip of less than one kilometre.

Exploiting delivery partners:

For nearby destinations, these companies also hire cycle riders instead of normal motorcycles. They are paid less but the customer is charged the same or more as already explained.

Legal issues:

Most of the above activities are unfair trade practices if not illegal. But so far authorities have done nothing. May be due to Pandemic but soon they may swing into action and it will have consequences which include economic consequences.

Future:

It is not a doomsday scenario. After so many years in business, it was time to rearrange on the basis of experience. The app needs redesigning. The back end needs reprogramming. It is time to treat apples and oranges differently.

I could give detailed suggestions but as stated in the beginning, I will not waste time on something nobody is going to follow. The changes were needed yesterday but nothing is done.

No wonder nobody has interest in the shares of Zomato which are making history in falling to half of Initial Offer Price or even lower.

Disclaimer:

This article is not a result of in-depth study of financial or legal aspects of business but is an opinion of a regular customer and some conversations with relevant people and observation of prices.

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