Zomato is convinced that intercity food delivery will be profitable at scale

Launched as a pilot in South Delhi and Gurugram regions a few weeks ago, food aggregator Zomato has also extended its Intercity Legends service to Bangalore. Zomato is also confident that the offering will pay off as it scales.

Intercity Legends currently offers renowned dishes from ten major cities and has partnered with approximately 120 restaurants. From Lucknow’s famous Tunday Galawati Kebabs to Kolkata’s decadent Gulab Patti Sandesh, customers can use the company’s long distance delivery service to order famous dishes from across the country.

“Even on a small scale, we will be able to make a profit. Because when we started, we thought it would be expensive and a luxury offering. However, our cost projections over time have led us to believe that it is not not a luxury. We do not believe that paying Rs 600 for a biryani is seen as a luxury by our customers,” said Siddharth Jhawar, VP of Global Growth at Zomato.

According to the company, the expansion of Intercity Legends to more cities will be gradual as demand increases.

According to Jhawar, customer data allowed Zomato to identify three use cases for customers using their long distance services.

“The first is nostalgia, as customers may want to relive certain childhood memories associated with specific tastes. Second, exploration, where customers would like to discover and try famous dishes from all over the country. And the third is celebration, where customers would like to order food from different cities on special occasions,” he said.

Sweets and desserts are leading the charge in terms of success for the platform. “People who fear eating day-old foods don’t show as much friction when it comes to consuming refrigerated candies,” he added.

Jhawar revealed that to gauge the success of the pilot, parameters such as repeat user behavior were taken into account, i.e. the percentage of users who placed a similar order within two weeks of the initial order. Other metrics included the number of refund requests and complaints as well as customer ratings.

“We’ve had very low refund requests, great customer reviews, and frequent repeat orders,” he said.

Ensuring food stays fresh and food safety is maintained is a priority for Zomato, Jhawar stressed. These restaurants are selected after careful consideration, ensuring that the dishes best exemplify the cuisines of the cities they belong to. Their dishes are then put through rigorous quality and packaging testing, with full refunds offered should any mishaps be revealed.

“There are different preservation methods such as freezing and modified atmosphere packaging (MAP). However, these end up altering the aroma and taste of food,” Jhawar said.

“We have found that the freshness of food is preserved if it is stored above 50-60°C or below 15°C. We use a special cooling liquid to ensure that the food stays at a constant temperature between 5 and 10°C, which is the most difficult part of the process,” he added.

“Laboratory tests have been carried out to ensure that the aroma, taste and texture of the food is preserved and maintained. Different types of food were tested at different time intervals and in different atmospheres before the launch of the pilot project. If some foods didn’t pass our quality checks, we didn’t ship them,” he added.

The cost of long distance orders is approximately 2.5 times higher than normal food delivery orders.

“For the average Rs. Flat 600, around Rs. 200 is for handling and Rs. 80-100 for last mile deliveries. Delivery costs also depend on the weight and volume of the dish,” Jhawar said.

The company also has links with third-party delivery platforms to make the deliveries.

“For closer areas like Agra and Mathura, we do deliveries by road. For most other cases we have links with various commercial airlines. These airlines are selected by third parties. We also have different partners for different logistical needs. For example, we use Shadowfax for some of our airline partnerships and first mile pickups,” Jhawar revealed.

Zomato’s long distance partnerships also operate on a similar build to their normal restaurant partnerships. The firm charges commissions as well as delivery costs, although higher.

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