Food apps: Post Covid biz picks up, offers significant growth

The online food deliver y market has witnessed a steady growth in user base and ordering frequencies. The customers were initially apprehensive about ordering food online. But, their confidence has returned af ter the repeated assurance about proper safety measures.

Af ter the initial hiccups, several Covid-related tailwinds are now benefiting the industr y. But, consumers still prefer staying indoors. It has prompted more fine-dining restaurants to get listed on deliver y platforms. It has helped food aggregators to improve their reach and penetration. The number of occasions celebrated at home has also gone up. It has helped food aggregators to receive more high-value orders online.

The opportunity size:

The online food deliver y market is set to gain significant size over the next few years. There has been a steady increase in user base and order frequencies since the ease in lockdown. The industr y is expected to penetrate into Tier-II and III cities.

It is expected to increase its user base from 1.5 crores currently to 8 crores in the next 4-5 years. As a result, the industr y's gross merchandise value ( GMV) could grow at 23% CAGR over the next five yearsfrom US$3 bn in FY2020 to US$9 bn in FY2025.

The industry dynamics:

Af ter the initial overcrowding of deliver y players, the competition has fizzled out drastically in the industr y. The market has become duopolistic with only two large players - Swiggy and Zomato - dominating the market. Sensing the opportunity during the pandemic, they have also ventured into the area of grocer y deliver y to monetize their existing user base.

Increasing numbers of higher value orders have also added economic stability to their business model. Revenue per order inched up while bringing the deliver y cost down. The consolidation has further helped the larger players to improve their business dynamics. With few players, the need to attract customers with discount offers has reduced. It has brought the customer acquisition and retention cost down.

Closing comments:

With a market size of USD 90 bn in CY2019, China is the biggest food aggregator market globally. Indian food deliver y industr y remains at a nascent stage when compared to this. Considering the recent nature of the industr y, profitability and other ratios are still evolving. We expect it to take a few more years before the business dynamics are fully understood. TejiMandi(TMInvestment TechnologiesPvt.Ltd.)isa SEBIregisteredinvestment advisor.Noinformationinthis articleshouldnotbeconstrued asinvestmentadvice. Pleasevisitwww.tejimandi.com toknowmore.