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Zomato Restores focus on Core Business, Scales down Grocery Vertical

On June 8, restaurants across India will be reopening after bearing the brunt of nationwide lockdown for almost two months. And this fact has put online food delivery major Zomato on hyper-alert, with the company deciding to restore the focus on food delivery business. This means that the Gurugram headquartered company will be retreating from its newly launched grocery business.

Zomato has said to several news portals that it will continue to operate on-demand delivery of essentials but with the announcement of unlock 1.0 the company will focus “large proportion of our time for food delivery services.”

Zomato had entered the grocery business through the recently created vertical Zomato Market. This new vertical was supposed to compensate for the company’s plummeting business during the lockdown period. With India imposing one of the strictest lockdown in the world, the Ant financial backed company saw its business plummet by almost 70-80%.

The story wasn’t any different for another online delivery major, Swiggy, which also saw substantial erosion in its revenue during these last two months.

In such unforgiving scenario, grocery delivery came as a life saver for several consumer focused or B2C startups. Since demand for grocery and essential products were skyrocketing during the lockdown period, many B2C startups entered into the online grocery market to fill their empty coffers.

Techpluto’s take on Zomato scaling down grocery business

Techpluto feels that Zomato’s decision to scale down its newly launched vertical Zomato Market is a right and wise decision. With its cash reserves completely stretched and facing enormous pressure due to COVID-19 crises, the Gurugram based company need to do everything possible to conserve capital. And the one way to do this is to spend less on its peripheral and more on core business.

The rationality of Zomato’s decision can also be judged by the fact that the grocery business is characterized by heavy cash burn and less margin.

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