After having a tiring day at work, you do not want to lose more of your energy in wondering what to cook and then actually cook it by spending hours in the kitchen. You just want already cooked food to appear in front of you. Swiggy has made this possible with doorstep service of cooked food from lakhs of various restaurants, cafes or lounges. You wish for it & Swiggy promises to get it on your doorstep. Am I the only one who is wondering how Swiggy got such a big success in such a less time? Let’s have a look at the business model of Swiggy, how does it work and make money.
Business Model of Swiggy.
The first and foremost thing about Swiggy is that it does not only list out restaurants on its application but also but also organises delivery partners who deliver the food within 30 minutes on-demand. The business model of Swiggy is purely based upon hyperlocal on-demand food delivery business operation. Swiggy makes use of an innovative technology and concept to bridge the gap between restaurants and food lovers. It operates on dual partnership model and hence it is also responsible for benefitting restaurants.
How does Swiggy works?
Swiggy operates through its websites as well as through its mobile application. The application is used by urban foodies to order food online from their nearby restaurants. Along with listing out restaurants, Swiggy also show bug menus of restaurants on its application so that the foodies can choose from a wide variety.
There have been a great success and rising orders seen by local street vendors as well who cook amazing food but were not in the area of recognition since they could not spend much on marketing.
Once the customer adds products in the cart and places order, he/she will be able to track the order. The user can also connect with the delivery boy and instruct him about the address. The address and location are anyway taken at the time of order but if customer wants to get any information related to order, he/she can get it.
Customer Segment: The prime customers of Swiggy are the people who want to order food from the nearby restaurants and eateries. People who wish to get the food delivered on their doorstep are the customers for Swiggy. After its recent announcement, there has been an addition in the customer type. People who want to order items from groceries, electronics, pharmacies, gift shops and flower shops are also the customers of Swiggy.
Value propositions: Two of the main Value propositions of Swiggy are – no minimum order policy and an efficient online payment system. So, the people who order food from Swiggy must be knowing that Swiggy has no restriction in terms of money of the order. You can even order a dish costing below Rs. 100. This is the main reason why it has scaled up to 14 million orders per month. Being a working woman living out of my hometown, it became very difficult for me many times to manage food but thanks to Swiggy. It takes care of all such people with no minimum order restriction, unlike other apps which might set minimum order to Rs. 300 or more. Due to this restriction, people generally drop the idea of ordering food because the same leads to waste of money and food if there is only one person to eat.
Other than this, Swiggy has a fantastic online payment system. It lets you pay from 8 different payment methods including Paytm, PhonePe, Freecharge, Mobikwik, Credit and Debit Cards, Sodexo Meal, Ticket Restaurants Meal & Zeta Food Card, LazyPay and Cash-On-Delivery.
Another value propositions of the company are its fleet size (45,000 delivery personnel, 2018) and 20,000 active restaurant partners.
Customer Relationships: Swiggy is known to have 24*7 prompt customer service. It interacts with you through website, app and social media as well. It has maintained a very good relationship with the customers so far. We all have seen people getting refunds if the user is not satisfied with the food or service.
Channels: Android & IOS mobile apps, website and social media platforms are the prime channels of operation of Swiggy.
Key Resources: The resources are the restaurants and shops listed on the application. For example, Keventers, Subway and more. Another resources include technology and delivery providers.
a. Establishing partnerships with restaurants, eateries and retail shops
b. Managing delivery providers (full-time/part-time)
c. Marketing of services and acquiring customers
d. Management of orders
e. Management of technical operations
f. Management of payment process
g. Handling customer concerns
i . Restaurants and retail shops: The prime key partners of Swiggy are the restaurants and shops which are listed on the application. The stores which wish to deliver their food at the doorstep of people are the key partners of Swiggy such as Subway, Keventers and more.
ii. Delivery providers: Delivery suppliers are the people who deliver food. They can be full-time, part-time or freelancers who work to earn some extra money.
1. It has Payroll expenses for employees handling designing, development, operations and delivery partners. Incentives and benefits are also included which Swiggy offers to restaurants. For instance, providing a commission of 5%.
2. Costs to maintain application and website development
3. Maintenance charges
4. Administrative cost
5. Brand advertising and marketing cost
6. Dispute related Returns, refunds and other expenses
7. Kitchen base-like facility setup
Find it at the below section.
How does Swiggy earn money?
To get you the answer, we had to understand the revenue model of Swiggy. There are a number of ways through which Swiggy earns money. Talking about the revenue generated, according to economic times “The battle for the top spot in the food delivery market, though, cost the firm dearly, with losses rising more than 93% to Rs 397 crore from Rs 205 crore last year, as per financial documents filed with the registrar of companies and accessed by data research platform Tofler.
This implies that Swiggy earned Rs 1.11 for every one rupee it lost in FY18. Swiggy’s losses, however, are far deeper than Zomato’s Rs 106 crore in FY18.” Adding to it, “While growth in operational revenue has been stellar, the firm saw total expenses more than double to Rs 865 crore as compared to Rs 350 crore last year. The rise in expenses has come mainly on the back of the firm’s increased efforts to widen its fleet, which now stands at more than 90,000 delivery executives.”
Right now, there are 6 revenue streams.
A. Delivery charges: It is charged when you order is below minimum order value. Swiggy charges a nominal amount of Rs. 20 to Rs. 40 to the customers. The charges also depend upon the high order demands or unusual weather conditions.
B. Advertising: There are two types of advertisements Swiggy allows. It allows brand to show their banner ads on the website and app for their promotions. On the other hand, it also allows restaurants to show their listing above in return for some investment from their side. Its like sponsored listing that directory websites do. Swiggy charges restaurants some rates to provide them with a priority in the list.
C. Commission: Swiggy takes commission from all the restaurants from which orders are placed. It collects 15% -25% of commission from each order.
D. Swiggy Access: Not all of us know, but Swiggy has come up with a cloud kitchen concept according to which it provides kitchen spaces to restaurants in a particular area where their chain does not operate. According to a source, “Expecting around 25% of revenues in 2 years, Swiggy expands its cloud kitchen model to include 30 restaurants onboard with 36 kitchens to four new cities.”
E. Swiggy Super: Swiggy Super is a membership program offered by Swiggy to its customers according to which there is unlimited free delivery on Rs. 99 above orders. If customers subscribe to this program, they don’t have to pay surge pricing during excessive demands.
F. Affiliate: The company has established partnerships with some of the financial organizations such as Citibank, HSBC, and ICICI Bank. It earns money by selling their credit cards.
Due to its unique features and great customer service, it might soon receive a competitive advantage over other such models and increase its already increasing customer base. Do not forget to mention in the comment box regarding what are the latest feature of the application you like the most.