Zomato, the food aggregator that has become synonymous with online dining, has delivered a pleasant surprise in its latest financial report. The October-December quarter witnessed the company’s net profit soaring to ₹138 crore, marking the third consecutive quarter of profitability. But what lies behind these impressive numbers, and how has Zomato managed to thrive in a challenging economic landscape?
Revenue Surge Amidst Inflation Woes
While the broader e-commerce sector grapples with inflation-induced woes and subdued consumer demand, Zomato’s revenue has surged by an impressive 69 percent year-on-year, reaching ₹3,288 crore. This growth is particularly noteworthy given the economic headwinds faced by many businesses.
From Losses to Gains
In the same quarter last year, Zomato had posted a net loss of ₹347 crore against a revenue of ₹1,948 crore. The remarkable turnaround underscores the company’s resilience and adaptability.
Balancing Costs and Revenue
Delivery costs have risen significantly, reaching ₹1,068 crore in Q3, up from ₹655 crore in the year-ago period. However, Zomato has skillfully managed its advertising and promotional expenses, limiting their growth to a mere 7 percent year-on-year, even as revenue soared.
Food Delivery Gross Order Value
Zomato’s food delivery gross order value has followed an upward trajectory, rising 6.3 percent quarter-on-quarter and a substantial 27 percent year-on-year, reaching ₹6,680 crore. These figures align with the company’s strategic guidance for the quarter.
Economies of Scale and Loyalty Surge
Behind Zomato’s robust performance lies a strengthening of its economies of scale. The company’s per-order profitability has grown, bolstered by a surge in subscriptions to its loyalty program.
The Platform Fee Conundrum
In a letter to shareholders, Zomato’s management sheds light on the factors driving improved margins. Greater ad monetization and the introduction of platform fees have played pivotal roles. However, the company remains cautious, stating that it’s too early to predict the long-term impact of platform fees. Much like the successful Gold program, Zomato continues to test the waters.