S curve stacking, monetising your mature business, unlocking new channels for growth, and other thoughts.

I think figuring out what to do at each stage of the S-curve of a business and how to stack S-curves well has been the biggest strength of Zomato/Deepinder.

For example, when food delivery was booming during the covid period, instead of just relying on that business, Deepinder acquired Blinkit. He knew that there would be tailwinds in a discretionary spend business after the covid, and that he would have to find new avenues for growth.

Now that Zomato’s top line is growing thanks to Blinkit, Deepinder has started to aggressively monetise the grocery business, which is in the late stages of the S-curve.

There have been a lot of complaints about higher platform fees and fewer discounts, but my guess is that Zomato’s power users are somewhat price-insensitive at this stage. One risk would have been Swiggy using the opportunity to counterattack and steal users from Zomato, but an IPO-bound company has to worry about its bottom line too.

There was a joke in my office that these new platform fees for Zomato and Swiggy were announced together and there could be some collusion. I doubt it. There is a common understanding of where both of them are at in terms of their food business, and what is the right thing to do at this point in time. Monetisation is the right way to go, I think. New and returning users will get their WELCOME BACK vouchers anyway. They would not mind the higher platform fees.

But if you are going to plateau on food delivery and there is going to be a point where you are going to exhaust your user segment that pays a premium for grocery delivery, then what are you going to do?

This is where the exploration of new S-curves comes into play. Zomato has been working on its offline going out business for quite some time now. But with this acquisition of Paytm Movies and their ticketing business, Zomato will have unlocked their newest business that can be in the growing phase of the S curve.

To recap: Food delivery is in the mature/late stage. Blinkit is in the later stage of the growth curve. My guess is that their going offline business will unlock another growth business for them. Hyperpure is another business they have, but my focus for this post is more on their consumer side businesses.

The cash flow from their food delivery business will be used to fuel growth in Blinkit and their upcoming offline going out business.

They have just announced their new District app too. It is clear that they will focus on that over the next few quarters.

GTV and revenue can be decoupled. You can run one business at EBIDTA neutral by focusing on topline growth, while the bottomline growth driver can come from another business. For Zomato’s topline, they will have Blinkit and the new offline business while food delivery will be what gives them the bottom line growth. Zomato’s huge revenue multiple is due to the fact that they are one of the few on-demand companies in the world that is showing strong topline growth while being profitable.

Supporting more use cases mean that their Zomato Gold subscribers will be getting more value from their subscription and Zomato will see lower churn in that segment. This playbook is very similiar to Amazon Prime’s.

So what is Swiggy supposed to do? I think they should just buy Rapido. Add the GTV of 2 million daily rides that Rapido does to their topline. Topline as in GTV, not revenue. While aggressively monetising the food business post IPO. If I were Harsha, the CEO, I would also set up a very strong lobbying unit to help bring clarity on 2 wheeler ride-hailing regulation. Imagine if there were 4 lakh delivery boys (Rapido + Swiggy combined) delivering food & groceries as well as taking customers to their destination. On-demand alcohol delivery is another regulation that can be passed through lobbying. I think most tech companies have focused on product improvements as a growth driver, while real growth can come through friendly regulations as well as buying growth levers like Zomato has done.