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Zomato Going Bankrupt ? | Dark Side of Zomato | Business Case Study - YouTube
Channel: Aditya Saini
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Imagine that you are the owner of a company that is
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growing every day.
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Your revenue is increasing every day,
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And success is kissing your feet
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everything is going very fortunate
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There is only one competitor left in the market.
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And the wait is there for the IPO
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Huge IPO arrives
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Listing gains of 56% to all investors
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and in a certain time stock price gets doubled
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But suddenly,
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You come to know that the losses of your company have increased so much
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that at any point of time, you may become bankrupt.
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If all these things happen to you then what will happen to you?
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ZOMATO
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The company whose IPO came out very loudly
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If you look at the figures,
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Since last 3 years this company is in very severe losses.
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In 2019, 964 crores,
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In 2020, 2367 crores,
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or finally in 2021, 812 crores
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15 November 2021,
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The share price of Zomato is 160 Rs. was at his all time high
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The people who invested money inside the IPO
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and sold the shares on time
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they made a lot of profit.
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but what about the rest?
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Because today the share price of Zomato has come below its issue price.
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Now the question is,
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that if people were seeing so many losses of the company from the beginning
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then why did people fiercely invest so much money in this IPO?
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After all, how did this happen to a great food delivery startup like Zomato?
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Is Zomato going to be bankrupt?
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And most importantly,
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What are the powerful business lessons
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that we can learn from this case study
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and implement in our business?
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This video is brought to you by ET Money
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which we will talk about next
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ZOMATO
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It's complicated
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This is because
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even today most of us know Zomato as a food delivery startup.
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And this is the reason that we know so much about the company.
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But not about the hyper local delivery ecosystem
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Zomato and infact Out of all its competitors,
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not a single startup has ever been profitable till date.
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And there are very high chances,
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These startups will not be profitable in the coming time as well.
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But why,
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And if so,
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why are these investors pouring crores of rupees into these startups?
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Well, to understand this,
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it is very important for you to understand about these 4 things.
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No.1, What is zomato's business model?
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No.2,
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what are the problems that are
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coming under the delivery ecosystem at this time?
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No.3,
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What were the future plans of the company
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that being sold to the general public
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No.4, and most importantly,
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What is the final game plan of the company?
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So in very simple words,
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Zomato generates revenue in these 6 ways
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No.1, Delivery charges
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No.2, Commission from restaurants
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No.3, Advertising from restaurants
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No.4, Subscriptions
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No.5, Hyperpure
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And last and most importantly, Consulting Services For Restaur.
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In these 6 ways Zomato generates revenue at this time
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Zomato got 75% jump in all its orders after Covid in 2021
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This year is not over yet
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and Zomato has already doubled his revenue from last year.
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I know what you are thinking!!
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If this is the case then why is the stock price falling on the daily basis?
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So now pay very close attention
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This is Zomato's unitechnomicz of the year 2021
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In which it is shown to the people,
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that even if the company is within the overall losses,
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but on per order basis our Unitechnomicz is profitable
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Seeing the thing, a lot of people invested in its IPO.
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but in the midst of all this
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There was a lot of talk about the hyper local food delivery space.
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Which till today is hidden from all of us
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And that is, Dynamism of gig economy,
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Gig economy is one such economy,
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Where people do not take permanent jobs,
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on contractual basis or on freelance basis,
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work for different businesses.
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Ola, Uber, Swiggy, Zomato, Dunzo, Blinkit
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All these companies either give you travel
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or hyperlocal delivery services.
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even if you move from one place to another through OLA,
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Or you can get any food from the swiggy
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Which is the final person that the service is rendering to you
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He is never an employee of these companies.
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So in very simple words,
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It is the driver of Ola or the delivery boy of Zomato,
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all these people are contract workers for these companies.
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It's not their employees
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Due to which these companies get these 3 very powerful advantages
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No.1, No fixed liabilities
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These companies do not have any liabilities
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on the side of these contract workers.
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No.2, No Appraisals
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Whenever you hire an employee,
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then after some time you have to increase his salary,
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if the business is growing then only
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But in this case because these people are contract workers,
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their salary is never increased.
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And 3rd, No employees benefit expenses
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Usually companies have to do a lot of expenses for employees.
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Just like Insurance, Gratuity, Provident fund
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Companies do not have to do these things
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because the people who are working with them
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are their contract workers.
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But due to this thing,
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where companies are sitting on one side very powerful advantage.
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On the other hand, companies are facing a lot of problems.
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Like if we talk only about hyperlocal delivery startups then,
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Even there companies have to face these 2 major problems.
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No.1, Unhappy Delivery Staff
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After talking to a zomato's delivery boy,
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we came to know that zomato delivery boys
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get money on the basis of their target
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But, there's a cache
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so see how it works
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Every Zomato delivered boy gets paid for meeting their touch points
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From restaurants to the customer's house
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It becomes 2 touchpoints
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If a Zomato delivery boy wants to earn 200 rupees
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So he has to cross at least 24 touchpoints
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Which is close to 12 deliveries
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So, if someone wants to earn 500 rupees a day by becoming a Zomato delivery boy
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then he has to do a minimum of 30 deliveries.
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And that to if none of these orders get canceled then
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Which is Close To Impossible
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I know what you are thinking,
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If so why is this Zomato deliveries boy doing this work?
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How do they earn their living?
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Well the reality is,
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Most of the delivery boys are alive on the Incentive Bonuses
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Suppose if you have met one of your particular target
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For an example, A zomato delivery boy,
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Crosses the target of Rs 240 for the day of his earnings
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After that he is given a bonus of 80 rupees.
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But the truth in this is that the incentive bonus will be given to him only
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when he remains logged in till 11 o'clock in the night
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and will work till 11 o'clock.
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What actually happens is that
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it looks like a very good and profitable deal from above.
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But the reality is that just to earn a bonus of Rs.300
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A zomato boy has to burn petrol worth a minimum of 200 rs.
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But there is a very big problem inside this system
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which all the delivery boys are facing at this time.
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which most people don't even know
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So basically,
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Zomato pays its deliveries boy Rs 4 per kilometer to travel.
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So for an example,
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The distance from restaurants to the customer's house is 5 km.
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The thing for which Zomato delivery boy will get 20 Rs.
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This thing looks fine but the biggest problem comes when
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a Zomato delivery boy operates inside Tier 2 and Tier 3 cities.
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Because the restaurants inside such cases are not present inside the local areas.
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In most Tier 2 Tier 3 cities,
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these restaurants are a bit far from those local areas.
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Now in this case now the Zomato delivery boy
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first travels from his local areas to another local area,
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for which he has to travel around 4 km.
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After that he will pick up the food from that restaurant
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and deliver it to your home.
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Whose distance is 5 kms
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and finally after delivering the food at your home
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he will come back to his local area whose distance is 4 kms
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In total one zomato delivery boy has traveled about 4+4+5 i.e. 13 kms
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But you know what!!
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Zomato will give only 5 kms money to the delivery boy
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Why, because according to Zomato the distance from
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restaurants to the customer's house is only and only 5 km
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And there is no earning of zomato delivery boy in such case.
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And it's nothing
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Zomato Delivery Boys Use Google Maps To Trace Customers' Location
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But Google Maps doesn't show the exact location in most of the cases.
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Happens is that the Zomato delivery boy reaches the location,
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calls the customer,
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And the customer calls him somewhere else
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Due to which 20 to 30 min. of delivery boy gets spoiled easily
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And let's say this happens in just 6 deliveries.
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Within 1 day, the delivery boy's 3 hours were wasted in the same way.
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And on top of it, From Petrol to Maintanance,
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From Toll fees to food
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All these expenses have to be paid by a Zomato boy from his pocket.
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Think that your favorite player is going out of form,
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then it is an obvious thing that you will not expect century from him
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But still you expect a little from him, and pray for him too
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Why, Because you love him
[498]
But even if it doesn't become a century,
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it doesn't matter to you, it won't matter to you.
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But what if you love with a stock
[505]
that's what i did, i fell in love with a stock
[507]
The thing that caused me a lot of damage,
[509]
and also caused me a lot of time
[511]
And that stock also didn't perform well
[513]
So it is not necessary that if a company is good
[516]
So his stock will always give you good returns
[519]
And this was the place where i became a ET money genius member
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This gives me such stock portfolios,
[524]
in which most of the stocks are not only of high quality
[526]
but are also high in demand.
[529]
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[533]
And what is that returns?!
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If you had invested in Genius High Growth Portfolio for 7 years
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[543]
So what are you waiting for??
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Go to the link in description, and try out ET money now
[547]
So now comes the second problem, Which is Exit Barrier
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Swiggy and Zomato Both these companies have taken 10 minutes delivery startup to fight Zepto
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But there is a cache,
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Where Zepto needs to open dark stores to expand itself
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At the same time,
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Swiggy and Zomato need not only to open dark stores.
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Rather, money has to be spent to maintain their food delivery space as well.
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Which is basically,
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Zepto will always have more money than these companies
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To expand itself
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Moreover,
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Where Zepto is focused only on Quick Commerce
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At the same time, Swiggy and Zomato cannot focus on quick commerce
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except their food deliveries space.
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Why,
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They have invested a lot of money in their food delivery space
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The reason for this is that
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They have a very strong exit barrier in front of them.
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So basically,
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To Survive in the Quick Commerce Space
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These Companies Have Only 2 Ways
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Delivery in 10 minutes is not an easy thing
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Due to which all these companies have to open their dark store
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in between 1 to 1.5 kilometres.
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If they want to reduce the delivery time
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And at the same time to ensure the safety of their delivery partner,
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So these companies will have to open a dark store within 1 to 1.5 kms.
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something that costs a lot of money
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And No.2, Exploit the workers,
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Which is already doing these companies
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I know what you are thinking,
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If a Delivery Startup is in Loss
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All delivery partners are upset with all these delivery startups
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But in spite of knowing all these things,
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Why did people invest money in the IPO of these companies?
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Well one reason,
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Hype,
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But this hype is not because of the branding of Zomato
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Rather, the future plans that were told to the people
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were made because of him.
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The company was in huge losses
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what almost everyone knew
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But these two things were kept in front of the people.
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And these things were marketed in a way you can't even imagine
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No.1, Hyperpure
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What will make Zomato will work on Farm to Fork model?
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That is, from the farm to the fork,
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the whole supply chain will be controlled.
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And along with this,
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Zomato will also open many cloud kitchens.
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But it's too late to be in this thing
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And No.2, Strengthen The Unit Economics
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People were told that even though we are still in Losses
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But in the coming time we will definitely be profitable.
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By strengthening our unit economics
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But if these companies want to strengthen their unit economics,
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So they have only 3 ways
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No.1, Increase Commissions
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Increase commission from restaurants,
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automatically unit economics will be strengthened
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But in this case there is a very high chances
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that many platforms after delisting themselves from these restaurants.
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will come with their own applications
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Or some other competitor comes in the market and shifts over it.
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No.2, Reduce Workers Pay
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Cut the money of all the delivery partners you have
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But by doing this,
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delivery partners will also start abandoning all these platforms.
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And 3rd, and most dangerous
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Price To Discount Illusion
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What is being done with people even today
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I'll explain you with an example,
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Where I live there is a restaurant near my house
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"Al-Nawab"
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Which sells very good biryani and I eat it regularly from there.
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Now look at this very very carefully
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Al-Nawab Restaurant,
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This is the actual menu of Al-Nawab Restaurant
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Where Half Chicken Biryani is listed at Rs.130
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This biryani is listed above Zomato, know how much
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Rs. 255.
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Moreover,
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if i order from zomato and i want extra gravy
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So i have to pay extra for gravy too
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Whereas if I buy directly from a restaurant,
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So I don't have to pay extra for any gravy.
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On top of that,
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This restaurant is just 2 kms from my house
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The thing for which Zomato charges very heavy delivery charges from me
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On the other hand,
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If I order directly from the restaurant
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then I don't need to pay any delivery charges.
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Everything is in front of you
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If i order my biryani from Al-nawab through zomato
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and that too after applying 60% discount coupon
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Even then I will have to pay a minimum cost of Rs 170-180 for this biryani.
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On the other hand,
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I can contact to al-Nawab and bring it for 130 rupees.
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And more importantly,
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Where I have to wait for at least 40 minutes to eat
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after ordering from zomato
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At the same time by calling al-Nawab directly.
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I can place this order in just 15 to 20 minutes
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So, In very simple words,
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The discount given on all these platforms is not a discount,
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is rather an illusion.
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In simple words,
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there is a risk
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Whether it is Swiggy-Zomato or Ola-Uber,
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Most of the Big Economy Startups Are Trying to Change
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the Consumer Behavior of All of Us
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And yes they are successful
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Today there is hardly anyone
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who would think of going to a restaurant to pick up their food.
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But,
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You know what!!
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None of us are attached to Swiggy or Zomato
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Rather, we are attached to the discounts given by these people.
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That is, if a person is getting more discount on Swiggy,
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So he will order from Swiggy.
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If he is getting it from Zomato,
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then he will do it from Zomato
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As of today customer is not related to any company.
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So in simple words,
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None of us is attached to the brands
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but the discounts they offer
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Which in reality is a deception
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Consumer awareness is increasing day by day
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And as soon as a new competitor comes in the market
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Very high chances, from delivery partners to customers
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Everyone will leave these startups
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and shift towards that competitor.
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But the question is, knowing all this
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Why all investors are giving crores rupees to these startups
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Why did the Zomato-Blinkit deal happen?
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Well, Let me tell you
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There is such a game plan behind all these things
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that people like you and me are not even aware of.
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And that is, GMV Pumping
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Evaluation of startups not on the basis of their profits,
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Rather it happens on the basis of their GMV
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It means, Gross Merchandise Value
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In very simple words,
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Revenue
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Year 2021, Zepto arrived and quick commerce started in India
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Before Zepto, neither Swiggy nor Zomato
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were in a hurry to deliver in 10 minutes.
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Then what suddenly changed,
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That all these people except the food delivery startup segment
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are now paying so much attention to the quick commerce segment.
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And this is the place: from where the concept of GMV begins
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If You Observe Too Closely
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Before the entry of Quick Commerce segment,
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when Swiggy and Zomato used to do food delivery only,
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Average order value size was at that time, 250-350 rupees
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But as soon as they enter Quick Commerce,
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their average order value size has increased to Rs 600 to 900.
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Whether profit or not by taking entry in Quick Commerce
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But the average order value size has increased
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Due to which the company's revenue has started increasing automatically.
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And as a result,
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As revenue gets pumped up,
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valuation gets pumped up automatically.
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So in best case,
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The investors who are there,
[945]
they will sell their stack to the rest of the new investors,
[948]
Or to the general public like you and me
[951]
And all this brings us to the most important thing
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what powerful lessons is that,
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What we can learn from this case study
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We can implement in our life
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First lesson, Learn to read the sides
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Whenever you are investing wherever you are
[965]
so you always explore all the sides of that thing
[967]
Because, In 99.9% of the cases
[970]
You will be shown the side of the investment that you like best
[975]
After reading in the news that this startup has been evaluated for so many crores,
[978]
never invest in these startups
[980]
Rather, Dig down and do your own research
[982]
Along with this, you also talk to those people
[985]
who are associated with these startup:
[988]
Because from there you will know the truth,
[990]
which is not being told to you.
[992]
2nd Lesson, Question everything and repeat
[995]
A startup is raising funding, raising why
[997]
After all, what is he going to do with the funding?
[999]
Do startups need to raise funding?
[1002]
A startup is buying out another startup
[1004]
why doing this?
[1005]
After all, what is there with this deal that we are not being told?
[1008]
Question each and everything.
[1010]
Because while doing this,
[1011]
you will not only get to know the things that are
[1014]
being hidden from you inside this process.
[1015]
but you also have to know about all those things
[1018]
who no one knows
[1021]
Every company has secrets
[1022]
And some such secrets are also inside the Tata Group.
[1025]
The Tata group has such a company,
[1027]
about which the rest of the people leave it,
[1028]
even the Tata group itself does not talk.
[1031]
But this is the only company that gives such a powerful advantage to the Tata Group.
[1035]
Which any other business group does not have
[1038]
Which is that company??
[1039]
After all, what are the secrets hidden inside the company?
[1041]
If you watch this right video,
[1044]
Then you will know.
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