The Indian economy is considered the 5th largest in the world, today, and amongst the very few countries expected to do well in the year 2023. The entrepreneurial spirit and the ability to leverage technological tools have been instrumental in several successful startups and Unicorns. The food industry especially the online food delivery sector is a classic example of this trend. The organized food industry in India was worth nearly ₹17,600,000 Lakhs in the year 2019 (before the Covid-19 pandemic hit the country), with online food delivery constituting about 15% - ₹26,40,000 Lakhs (as per GLG survey).
The online food delivery space is dominated by 2 players- Swiggy and Zomato, with fluctuating but similar market shares. Let us look at the Swiggy business model and the key factors behind its success story. Restaurants and Shops desiring to be listed on the Swiggy platform, should check here ‘How to register on Swiggy’?
Did you know that the online food delivery market was valued at ₹40,00,000 Lakhs in the year 2020, estimated to grow at nearly 30% to a value of ₹ 1650 billion?
The Swiggy Story
People’s changing eating preferences have fuelled the growth of online food delivery in the top cities like Bengaluru, Mumbai and Delhi and the remaining smaller cities are catching up fast.Talking of changing eating habits of people – in today’s fast pace world, who would want to eat out, if it involves navigating the busy traffic, and going through a waiting time, before getting a table at a restaurant? Or better still if you can get your favourite food delivered home hot, fresh and within 30 minutes at a reasonable cost? This changing perception towards ‘eating out’ is what Swiggy has tapped into. Three friends- Nandan Reddy, Rahul Jaimini, and Sri Harsha Majety sensed this huge opportunity by launching Swiggy.
With a not-so-successful venture in e-commerce through ‘Bundl’, they applied their learnings from e-commerce to start Swiggy- a company that would foster and leverage the convergence of Technology and Logistics. Launched around the time the Food-Tech sector was booming, today the Swiggy App – an online food ordering and delivery platform and key component of Swiggy business plan, is acknowledged as the technology tool that delivers results with convenience, to both consumers and restaurant businesses.
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Swiggy Business Plan or Matrix:
The points below will help you to understand the swiggy business plans in a brief that contains its key features, resources, activities and more:
Customer segments of Swiggy
The business model of Swiggy has a clearly defined customer category, to which it caters to. Their main customers include those who like to avoid the hassle of travel-traffic jam-restaurant wait time for eating out, those who prefer to order food online, and others who like the convenience of ordering-door delivery from nearby stores and shops. The delivery service is well-designed to meet the preferences of these primary customers.
With the recent expansion to offer local delivery services, people who like to order daily consumables, medicines, stationery, small electronic appliances, flowers and gifts, are also a key addition to their customer base.
Swiggy business plan and its value propositions
The important value propositions that are the key drivers of the business are:
- Ordering policy that has no restrictions on the type of food – vegetarian, non-vegetarian.
- Ordering quantity without any minimum limit. Order valued at less than ₹100 is also delivered.
- Ease of access through an easy-to-use Swiggy App.
- ‘Instamart’ - Designated ‘Swiggy Stores’ that deliver groceries/daily consumables; and participating stores that deliver meat, flowers and medicines, to customers.
- Swiggy Genie – an instant pick-up and drop service used by customers to send lunch boxes to children/spouses, documents to the office, and urgent parcels across the city.
- A range of payment options to suit the varying needs and conveniences of customers. It includes:
- Digital wallets – Google pay, Phone Pe, Paytm, Amazon Pay, Freecharge, Mobikwik.
- UPI – like Bhim UPI and all leading payment Apps
- Cards - Debit and Credit cards
- Pay Later platforms like Lazy Pay
- Cash on delivery
- Efficient delivery competency based on its large network of delivery partners and participating, eatery partners.
- Swiggy faced intense competition from other food delivery companies like Zomato and UberEats, but has managed to maintain its market share. The profitability of the company may be affected by various factors such as rising delivery costs, increasing competition, and changes in consumer behavior.
- Swiggy's value proposition is to provide fast, convenient and reliable food delivery service to its customers. The platform allows customers to search for nearby restaurants, view menus, place orders and track deliveries in real-time.
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Channels of Swiggy
The primary channels of Swiggy are:
- Mobile Phone app - for both Android and iOS platforms
- Website
- The app offers customers food delivery, ordering daily consumables, and pick-up and delivery services
Key resources of Swiggy
Swiggy’s key resources are its local restaurants and shops, with whom it partners. The app lists a large range of restaurant partners in metro cities like Bengaluru, Delhi and Mumbai. Popular brands include Leon’s Burgers, MTR, Dominos Pizza, and Aubree (this keeps varying as per the city location and customer ordering trends).
Technology is another key resource that the company leverages for its delivery services, through its popular and efficient App.
Key activities of Swiggy
The company implements key activities in the process of providing efficient food delivery and local couriering services. It includes:
- Developing partnerships with local restaurants and stores
- Acquiring customers and managing their orders
- Hiring and managing delivery partners – full-time, part-timers, and freelancers
- Building, updating, and managing the App and the backbone IT infrastructure
- Tracking and managing the delivery and payment services.
- Handling and resolving customer queries, complaints, and feedback
- Managing the Pick-up and delivery services
Key partners of Swiggy
Swiggy’s business plan entails partnerships with several key players to meet its delivery service objectives. It includes:
- Restaurants that like to be listed on the Swiggy platform, to deliver food on demand to their customer’s premises.
- Vegetable & Fruits, Grocery, Meat and Pharmacies who like to partner with Swiggy to expand their business outreach through the online platform
- Delivery providers are their key partners that deliver food, groceries, vegetables & fruits, meat, medicines and other items to customers, as per their demand or need. Delivery Partners join the company to earn primary or additional income with flexible terms of engagement. They are paid on a per delivery basis and compensated additionally during rains, traffic, and other major disruptions. Delivery partners can also avail of performance-based incentives, besides the facility of customers tipping them separately.
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Customer Relationship of Swiggy
The home delivery model is dependent on managing customer relationships effectively. Any operations involving a large customer base such as Swiggy’s involve providing 24X7 customer support services, through Chat and telephone calls with customer support executives. The company also uses a good review, rating, and feedback system through App and e-mail to help improve customer satisfaction and overall delivery services.
Cost structure of Swiggy
Swiggy is continuously scaling up within the existing cities-towns it is operating but also to newer geographies. The operations of this scale come at a cost. The expenditure incurred can be broadly categorised as:
- Salary expenses and incentives for its delivery partners and staff
- Benefits & incentives offered to partner Restaurants and Shops, including Commission paid
- App development and updation, and IT infrastructure costs
- Running and maintenance costs
- Administrative, advertising, and marketing expenses
- Cost of promotional/ seasonal offers and benefits given to customers
- Cost of refunds, returns, and any such miscellaneous expenses
Swiggy revenue model
How Swiggy makes money? This can be gleaned by analyzing Swiggy’s business plan and in particular its Revenue model. As per its current business strategy and scale of operations, the company earns income from the following streams:
- Delivery charges: Delivery charges are levied to customers for food delivery and pick-up and delivery services. During rush and high order hours, rains, and unusual disruptions additional ‘surge charges’ are applied. Customers are charged a fixed base fare and variable fare depending on the restaurant or shop’s distance to the customer’s home/delivery point.
- Commissions: How does Swiggy earn money? Commission charged to restaurants to generate sales leads and deliver through the company’s delivery fleet, is a major source of revenue. Swiggy charges restaurants 15%-20% for every order from its platform.
- Advertising: The company gets advertising revenues through banner promotions and ads on its App. Restaurants get greater visibility by paying for banners and Ads.
- Priority listing of restaurants – Restaurants can opt for a priority or higher listing of available restaurants on its App. These services come at a premium price.
- Swiggy Genie: Swiggy Genie is another innovative part of Swiggy’s business plan. The concierge services provide under this banner to pick up and deliver items and parcels within a city location, is another source of revenue for the company. Although competing with other brands like Dunzo, this stream does provide sizable income for the concierge services provided to customers.
- Swiggy Super: This was a membership program offered to customers. For a subscription amount of up to 12 months, customers could benefit from unlimited free delivery of orders valued at ₹99. Swiggy Super subscribers also didn’t have to surge pricing during high demand or seasonal traffic delays. This facility is however discontinued now.
- Affiliate Income: Affiliate income from partnering Banks and Financial institutions is another stream from how Swiggy earns money. Participating Banks/FIs provide Debit-Credit Cards services and Offer them from time to time, gaining additional business traction, which is a win-win proposition for both parties.
Conclusion
The Indian food delivery industry is essentially a duopoly market dominated by Swiggy and Zomato. Although the market share of these competing companies is constantly changing with one leading over the other, Swiggy has still grown to be a leading food delivery and concierge services company in the country. The innovative business model of Swiggy has influenced how India eats and has satisfied many a foodie’s taste buds by delivering hot and tasty food to their homes.
Its unique value propositions make customers happy, provide restaurants with increased visibility and business, and shops with added business. The innovative use of technology to constantly provide better and faster services and new services through its popular Swiggy App has endeared customers and partners alike.
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