The Indian Online Food Delivery industry experienced many roadblocks in its growth story in 2016 with multiple players scaling down their operations or shutting shop. This was also visible in low investor sentiment wherein the industry saw a total funding of less than $80 million in 2016 against $500 million same period year before.
Even in this scenario, the industry (aggregators and internet kitchens together) grew at 150% rate y-o-y last year with an estimated GMV of $300 million in 2016. For Restaurants, the online platforms have helped them increase their reach and this additional business source has improved their resource utilization. And customers have started to opt for the multiple choices offered by online platforms in place of ordering food by calling individual restaurants. This was confirmed in our study wherein, share of online food delivery for partner restaurants (restaurants associated with online delivery platforms) covered in study has reached to 30-35% of their total business and this numbers seems to be growing rapidly by the day.
With more than 80% of orders coming in from Top 5 cities (out of 20+ cities where online food delivery is active), the established players are focusing on achieving operational efficiencies and profitability in these cities and have limited their expansion to newer markets. Internet kitchens with their niche offerings have come up in key cities during the period.
Commenting on the findings of the research, Anil Kumar, Founder and CEO, RedSeer Consulting said, “With customers and restaurants both embracing these online food delivery services, the order volumes have shown a healthy growth but the fundamental issue of unit profitability and operational efficiencies need to addressed to build a sustainable business in this sector”