How Swiggy devoured competition in India

How Swiggy managed to hold its own against giants like UberEats and Zomato

Swiggy is India’s choice online food ordering and delivery platform. By December 2018, Bengaluru-based startup, Swiggy, held nearly half of the market share by transactional volume in the Indian online food-delivery space. In mid-2018, Swiggy became India’s fastest startup to turn unicorn. By the end of that year, it had raised $1 billion to expand its delivery network, explore cloud kitchens, and even grow internationally.

History

The company was founded by Sriharsha Majety, Nandan Reddy and Rahul Jaimini.  Majety and Reddy had previously worked to build an online platform-Bundl- in 2013 to connect courier companies across India. The venture had to be shut down and they moved to the food delivery industry. They had the vision, business model and product mindset to build the company but realized that they don’t have enough technical skills. They recruited former Myntra software engineer and IIT alumni-Rahul Jaimini to fill their gap. The three co-founders used their respective skills to build a distinctive online food ordering startup and thus was born Swiggy on August 2014.

Challenges and Strategies

Network effect

The cross side network effects were clear and strong. The more customers swiggy had, the more restaurants were likely to be on their platform and the more restaurants on the their platform, the more likely customer were to join. Swiggy realized that they had to grow both fronts.

The likes of Zomato, TinyOwl and Foodpanda built marketplaces that connected customers to restaurants but “outsourced” delivery to either restaurants or third-party logistics providers. However, Swiggy was convinced that the only way to crack the food delivery market was to build an extensive logistics network. Maintaining their own delivery staff was not cheap and here is where Swiggy’s customer obsession paid off. Swiggy was widely regarded as the platform that offered the best customer support. While UberEats didn’t even maintain a proper customer support call center, Swiggy was refunding customers instantly whenever they had any issues. They also offered a variety of payment options including cash-on-delivery. Their customer support was so far above the rest that their clientele didn’t mind when they started charging for deliveries.

 

Multihoming

Swiggy just like other such platforms were at high risk of multihoming. Customers generally looked for their favorite restaurants on Zomato, UberEats and Swiggy before ordering. They were generally looking at the best rates and their favorite restaurants. All platforms have been offering significant discounts to the point where dishes were cheaper on these platform than they were in restaurants . Here is where Swiggy started to sign exclusivity contracts with restaurants. Swiggy Exclusive restaurants were shown ahead of others incentivizing the restaurants to be exclusive on Swiggy. With nearly half of the market share by transactional volume in the Indian online food-delivery space held by Swiggy, the restaurants were not to displeased with the offering. This move also locked in customers who were loyal to their favorite restaurants.

Conclusion

Swiggy understood the customers on both sides of their platform and curbed multihoming to build an impressive platform in a competitive space. With Zomato (2nd in the market) set to buy out UberEats (3rd in the market) the future of Swiggy may demand much more from the platform that ever before.

Reference

https://qz.com/india/1635965/in-2018-swiggy-beat-zomato-olas-foodpanda-uber-eats-by-a-mile/

https://www.entrepreneur.com/article/325292

https://www.livemint.com/Companies/NsVFwJMvONZm8qEDJuGoOM/How-Swiggy-became-Indias-fastest-unicorn.html

https://www.asianage.com/life/more-features/250219/uber-eats-or-only-swiggy.html

 

 

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2 thoughts on “How Swiggy devoured competition in India

  1. Thanks for writing this article. In India, I was a big user of the Swiggy and agree with most of the points listed in the blog-post. In addition to the exclusive contracts, I believe one of the biggest competitive advantages they have is the quality of the service. As a customer, I preferred it over other platforms because of the quality of service it provided.

  2. Loved Swiggy! Another advantage of the app was that it built multiple (1000+) cloud kitchens that help small mom-and-pop dining businesses to open without capital investments. Also, Swiggy is trying to solve for the delivery fees that most customers are deterred by by offering monthly subscriptions (Swiggy Super). This makes the user more sticky and reduces the impact of multihoming.

    The concern, as you mentioned, is that Zomato and UberEats are working together now. That expands their market share immensely with Uber (probably) having more money to burn. Zomato can also build great restaurant relations since it has its own wholesale arm that supplies ingredients and runs successful loyalty programs (Gold). It seems like Swiggy will lead in the low-end market and Zomato captures higher-end, resulting in low margins for Swiggy in an already unprofitable industry.

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