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Jan, 11 2016

An unexpected turn: Zomato shuts down online ordering in 4 cities

Less than 5% of Zomato's orders are discounted, making Zomato one of the few tech startups to not use negative gross margins to grow the business.

By Nusra

At a time, when online ordering is growing at about 20-25 per cent, Gurgaon-based restaurant discovery and food ordering app Zomato has announced that it will be shutting down its online ordering service in Lucknow, Kochi, Indore, and Coimbatore.

Zomato launched its online food ordering business in April 2015, allowing its users to order food online from restaurants using the Zomato app, and had since expanded this offering to 14 cities across India. But, due to certain negative aspects on the growing business, the online delivery player planned to shut operations in these cities. Here are four major reasons:

1) The size of the market in these cities is small right now. 2) Zomato didn't see a significant increase in the order volumes in these few cities 3) The market is not yet entirely ready for the online food ordering business 4) The combined order volume in these 4 cities accounted for less than 2% of Zomato's total order volumes

"We are shutting down the ordering business in Lucknow, Kochi, Indore, and Coimbatore. The size of the market is in these cities is small right now and is growing with time. We will re-launch when the time is right. In the meanwhile, we will continue to offer the best content (including scanned menus) to ensure that foodies are able to find and order great food,” shared Pankaj Chaddah, Co-Founder, Zomato.

Despite Zomato's recent marketing efforts, including television ads, it didn't see a significant increase in the order volumes in these few cities. These smaller cities are not yet entirely ready for the online food ordering business, but once they are, Zomato will reconsider its strategy.

The combined order volume in these 4 cities accounted for less than 2% of Zomato's total order volumes. Overall, Zomato's online order volume is growing at a healthy 40% month-on-month. Less than 5% of Zomato's orders are discounted, making Zomato one of the few tech startups to not use negative gross margins to grow the business.

Zomato has 75,000 restaurants listed on its platform in India. Foodies can use the online ordering feature to order from 12,000 of them. Zomato also works with delivery partners Grab and Delhivery to offer delivery from restaurants which do not otherwise deliver food.

Zomato recently introduced an in-app chat support feature, enabling consumers to chat with the team at Zomato for any order-related queries. This feature is currently available to users in India and UAE. With their latest app update, Zomato has also included a host of new features and performance improvements to make the online ordering experience even better.

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