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When it comes to world-class “free” services such as Google, Facebook, Instagram, the product is our data. We interact with these platforms for “free” and in turn, they learn about our preferences. Companies have established multi-billion dollar empires solely on customer data through personalised advertisements. Many consider it an invasion of privacy or to investors, a genius idea that revolutionised the advertising industry forever. User data has a vast multitude of applications, beyond advertising. Businesses, especially “middlemen” services, can utilise this information to wipe out competition and provide immense convenience to their customers.

Amazon has become a consumer favourite. It is fast, cheap and convenient. It has also helped keep us relatively protected from the virus. The company truly brought about the e-commerce revolution, without which life would have been unimaginable. But Amazon has another trick up its sleeve, which many tend to overlook.

A Silicon Valley startup, June, founded in 2013, was the pioneer in innovating the smart oven. The oven consisted of advanced technological features such as WiFi connectivity, voice control, touch screen, etc. These features seem ordinary in 2021 but in 2013, they attracted multiple heavyweight investors. In 2018, June raised capital through Amazon’s “Alexa Fund”. Everything seemed perfect, June witnessed exceptional growth during 2015-2019. It even became a bestseller on Amazon. However, in the fall of 2019, Amazon launched its smart-oven, with all the features June offered. The Alexa controlled oven was retailing at $250 only, whereas June’s oven ranged from $499 – $799. June was forced to compete with its prime backer, Amazon ruthlessly started eating into the profits of the bestselling oven.

The reasons for this betrayal are obvious. Amazon can earn higher margins by promoting self-made products. Amazon was able to overtake June by utilising its goldmine – seller and customer data. The e-commerce giant had all the product specifications on its website and also the customer reviews, revealing the favourite features. Amazon utilised its “digital real estate” to rank its own product as bestselling and used aggressive pricing models to demolish competitors. Data is a superpower; it allows Amazon to design top-quality products without any trial and error.

India’s food-tech startup, Zomato, sits on a goldmine, similar to Amazon. Zomato has the data of thousands of restaurants and millions of foodies all across India. They know exactly which dish is a consumer favourite in each locality, its optimum pricing and the ideal season to sell a particular product. For example, Zomato knows that in Andheri, Mumbai, butter chicken is a bestseller. Its peak season is sometime around November. They know how the top restaurants make their butter chicken, courtesy of order specifications. They are also aware through customer reviews, that people in this locality enjoy relatively spicier butter chicken. Zomato could easily undercut dominant restaurant chains. This invaluable information enables Zomato to launch highly profitable food chains catering to the exact preferences of consumers. The food-tech company may utilise its digital real estate to promote its food items to millions of customers engrossed in its ecosystem via its user-friendly app.

Data also enables Zomato to stride into the realm of cloud kitchens. Cloud kitchens refer to an extensively efficient restaurant which only offers take-aways. The image below compares the necessary costs of running a 50 seater restaurant, considering average prices.

Clearly, cloud kitchens save unprecedented amounts on rental deposits and working capital. In addition, the monthly revenue required to break even in two years for cloud kitchens is half of what restaurants require. The pandemic has incapacitated dining-in services, cutting down sales by 90% according to CRISIL Research. Food delivery has become an essential source of income for restaurants as they struggle to survive. Furthermore, the low investment and capital involved have encouraged new food entrepreneurs to start their own ventures. But how can Zomato take advantage?

Consider the example of Rebel Foods, the parent organisation of nine cloud kitchen brands including the likes of Behrouz Biryani, Ovenstory Pizza and Faasos. A significant portion of their orders is redirected through Zomato. Faasos is even a bestseller in Zomato. Rebel Foods and Zomato share the same relationship that June and Amazon did, i.e, of a bestseller and an aggregator. Zomato is capable of overthrowing its top performers by utilizing the power of data. Zomato’s approach, however, is much more ethical than Amazon’s.

Zomato Kitchens is a partnership between Zomato and handpicked brands all across the country. It provides these brands with customised growth plans, aggressive marketing, consumer insights and menu idealisation. In this plan, multiple brands share the same kitchen space, reducing overall costs tremendously. Continued investments and growth could potentially give rise to super cloud kitchens; extremely efficient cloud kitchens accommodating more than 50 brands in a 2000 sq. ft space that process approximately 3000 orders per day.

Zomato always has the option to build its own food chain empire. As Zomato itself is the aggregator, no middleman costs would be levied on the same. Additionally, Zomato Hyperpure is creating a robust supply chain to provide vital ingredients and kitchen products to restaurants, slashing costs even further. Finally, the digital real estate and established delivery network all across the country can be utilised to facilitate aggressive yet profitable expansion.

Zomato’s potential is evident through its initial public offering. The tech startup’s IPO was oversubscribed by 38 times, showcasing the positive sentiment of investors. Even though Zomato has been a loss-maker and has struggled to improve unit economics, it possesses the most valuable asset – data. Data could help transform the company into a profit-making machine and justify the immense trust of its investors.

Zomato’s competitor Swiggy too has access to this data superpower. How the food tech rivalry plays out over the coming years, determines how we enjoy our favourite dishes. But one thing is certain, the cutthroat competition will ensure that our beloved biryani reaches us in time, hot and as delicious as ever.

By Ashwin


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