Zomato on Thursday said that it has cut operating costs from $9 million to $1.7 million taking a host of measures, which also includes pulling out from nine countries like the US and the UK. The company, however, added that it will continue to service these markets remotely and the pull out was more in terms of not having any physical presence.
Zomato now has feet-on-the-street (physical presence) in 14 counties, which was 23 last year. These countries are where Zomato had launched recently and were not market leaders.
There would have been losses in terms of the incubation period of these markets and the countries we are left with are the ones we are market leaders, said Deepinder Goyal CEO & Co-Founder of Zomato in an analyst call, reported ET.
“We are technically present in the US through an acquisition, but things did not work out as we planned. The other markets that we have pulled out from include Chile, the UK, Ireland and Sri Lanka,” said Goyal.
He also added that the product in each of these nine countries is still working and growing, and only the operations will now be from the India centre.
“Early last year when the market was good we were to raise substantial capital and go after opportunities to expand to a few countries. However, late last year the market shifted and there was a lot of competition in India and UAE. We had to take a lot of steps to align with the market to ensure we are a sustainable company,” said Goyal.
He also said that it would be wise to scale back and focus on 14 countries. “We had to cut presence in some high-growth, but high-risk geographies. This was one of the reasons for getting our burn rate from $9 million sometime last year to about $1.7 million now.”
Zomato’s loss before tax has shot up by 262% to Rs 492.3 crore for FY16, but revenue had nearly doubled to Rs 184.97 crore for the year from Rs 96.7 crore in the previous year.
Growth is possible without any presence in the pulled out countries, says Goyal. “For example, Urbanspoon has been hugely successful in Australia without having any physical presence there. We have learned from Urbanspoon on how to use tech to scale presence in markets without physical teams there.”
He added, “We will use a lot of tech and social network to good use in the markets we have pulled out from. While not having feet on street teams in these markets is not as optimal as having them, we are already doing much better than our competitors in these nine markets (barring the US of course).”
It was needed to cut down both on money and management bandwidth after Zomato’s rapid expansion last year as it now looks to achieve a certain threshold needed to monetize each operation, said he. “Putting the team back in these countries is not off the table if we can reach a certain threshold level needed to monetize it,”
Goyal said that monthly growth rate of delivery business is about 30 % and daily average over the last week 25,000-26,000 per day, with an average ticket size of Rs. 480. “Our unit economics is positive even after outsourcing the delivery. Zomato makes about Rs. 20 contribution margin on all deliveries in India and Rs. 50 contribution on all orders in the UAE. We are the largest player by GMV by market share in the countries we operate in.”
He added that the company has a substantial amount of capital still left to lead in the markets it operates in. In terms of total revenue, India clocks 45 % of the company’s revenue while UAE clocks about 20% of its revenue.
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