And as the Economic Times reports, this move now leaves just two big players, Swiggy and Zomato, to go head-to-head for dominance of the market.
Ola’s Foodpanda and Uber’s UberEats say they will cut back on investments in their food arms. Uber is reported by the ET to have halved its annual budget for the food-delivery business in India to between $90 and $120 million. Uber has also been cutting back drastically on customer incentives since earlier in the year.
The cuts come in the wake of an initial decision by the US-based peer-to-peer ride-sharing company to allocate its largest budget globally to the market in India in order to boost the food-delivery side of the business, the ET quotes sources as revealing.
Uber listed on the New York Stock Exchange on May 10 this year.
Ola has also found the sector tough going, with the ET earlier reporting that it had scrapped plans for a major investment in Foodpanda India, which it bought from its German parent Delivery Hero in 2017, in a deal reportedly worth some $40 million.
The country’s food delivery sector is forecast to be worth between $2.5 billion and $3.5 billion by 2021, according to RedSeer Consulting.
The decision by Uber to cut spending on its food-delivery business follows an attempt to sell UberEats India to Swiggy as part of cost-cutting measures undertaken as preparation for its IPO. A deal with Swiggy failed to materialize, however.
“Swiggy and Zomato have deep pockets to burn cash on customer discounting for the foreseeable future, and in this environment, Uber doesn’t believe the current unit economics of the delivery business will be viable to double down in India,” the ET quotes a source as saying.
While UberEats’ business was experiencing stellar growing of around 25% every month, the ET reports, that growth has now flatlined at around 13 million orders a month. By comparison, Zomato and Swiggy deliver between 30 and 35 million orders a month, industry observers estimate, while FoodPanda takes between three and four million orders a month.
“Last-mile logistics is an operations-heavy, low-margin business. I simply don’t see how the market can sustain so many parallel micro-logistics networks,” Kartik Hosanagar, professor of technology and digital business at the Wharton School told the ET.
Sourced from the Economic Times; additional content by WARC staff