Swiggy Business Model – A Detailed Case Study
Sriharsha Majety and Nandan Reddy, the two alumni of Birla Institute of Technology and Science (BITS) Pilani, are the brains behind Swiggy. Back in the year 2014, both were working on their first startup, Bundl which is a platform that connects SMEs to courier service providers. At first, the business concept was a big hit.
However, a year later, they discovered that there is immense scope in the food industry. They recognized that there is a great need for hyper logistic companies in the hotel and restaurant industry. And, this led to the birth of India’s first online food ordering platform.
They joined hands with Rahul Janimini, an IIT Kharagpur alumni to handle the coding part of the platform.
“Entrepreneurship was always in my blood. My father runs a restaurant in Vijayawada and plans to invest in the hospitality sector and my mother is a doctor by profession and has her clinic. She is also planning to start her chain of beauty parlors. Seeing my family members being in charge, and taking control of what they do was an inspiration from early years.” said the founder of Swiggy.
For Swiggy, they set up their office in Koramangala, Bangalore. Six delivery executives, one neighborhood, and approx 25 restaurants are with which Swiggy got started. But, from there on Swiggy never looked back, its growth has been 25% month by month. In merely four years, Swiggy expanded its operations to Kolkata, Delhi, Pune, Bangalore, Chennai, Mumbai, and Hyderabad.
Now, Swiggy has more than 13,000 delivery executives and 12,000 restaurants listed.
The year 2015 was remarkable for Swiggy, as they got big fundings from Venture Capitals and Norwest. The USP of Swiggy’s success is no minimum order policy that allowed foodies to order anything to everything from the comfort of their home/office. They have also attracted a huge customer database thanks to discount coupons and best deals.
In the online food ordering industry, there are 65 competitors, with Zomato and others top of the list. Preciously Ola and Uber had all invested in this industry. As of now, the current market share of Swiggy is approx 35-38%, while Zomato’s share is about 25-30%.
The year 2017 was incredible for Swiggy as their revenue numbers grew six times. They launched a program around the concept called Cloud Kitchens, which allowed restaurant partners to set up their kitchens in areas they are presently not operating. The concept created a massive buzz among the millennials. Along with this, the company also got the biggest investments of approx $80 million in Series E.
In 2018, Swiggy bagged $100 million from Chinese investor Meituan-Dianping. And, this investment has enough to make them the dominant force in the online food industry, leaving behind Zomato and others.
Swiggy Business Model: How It Works?
Swiggy’s business model is pretty straightforward, it is an online food ordering platform. Popularly, the dedicated mobile app allows its customers to place an order with a few taps. They are most preferred over the market rivals with the likes of Zomato because they have the widest network of neighborhood restaurants. Swiggy offers doorstep delivery in minimal time, making it a preferred choice at homes and offices.
Let’s read on as we understand the Swiggy’s App working:-
- First, the user is required to download the Swiggy app on their smartphone and install it. This won’t take more than a few minutes.
- Next, they need to sign up and become customers of Swiggy. The signup process won’t take too long, just the basic details or the user also straightway login via social media.
- Once the user has logged in, next they are required to pick the restaurant from multiple options in their geographical location.
- After selecting the restaurant, you have to place your order by adding dishes. You can either pay online via GooglePay, PayTM, or any other secure payment platform or place a COD order.
- When you have placed the order, the concerned restaurant receives it and confirms it.
- The local delivery executive has to confirm the pickup & drop-off location.
- Next, within a minute or two, the customer receives the alert that their order has been confirmed, and the details of the delivery executive who will be responsible for the delivery.
- The customer can track the journey of their order, right from when the food is ready at the restaurant, the delivery partner picks it, and on the way to your delivery location.
- Swiggy will mark your order complete when the delivery is done.
- Once the order has been completed, Swiggy requests their customers to rate their delivery executive and restaurant.
- As we can see the entire working mechanism of Swiggy is efficient, with no scope of delays. If the customer has any query or complaint regarding their order, they can chat and connect with the customer support executive of Swiggy right away.
Swiggy’s online ordering system is really smooth for both customers and restaurants. If you’re a local restaurant business owner and want to integrate such online food ordering systems in your business, then you can definitely check out our services at NinjaOS.
How Swiggy Earns Money?
Swiggy’s business model understanding is incomplete without this section. There is no doubt that Swiggy’s concept of connecting foodies with delicious food at local restaurants was an instant hit. But, they heavily rely on delivery executives to grow their business but having said that, they had to give their delivery executives good incentives and rewards to fuel their business.
However, what are the revenue streams of Swiggy that empowered them to meet all the expenses and support their future ventures?
Here’s the Swiggy revenue model and its various revenue streams:-
Delivery Charges From Customers
What made Swiggy so popular is there is no minimum order policy. You can even place an order of less than Rs 100. However, you may feel that Swiggy is hurting its revenue doing so. But, no, they apply delivery charges. The delivery charges are nominal between 10 to 20 Rs, if the order is less than 250 Rs.
Swiggy often increases their delivery charges during the peak hours of the day, special occasions, rains, or midnight delivery. The customers love placing small orders, and Swiggy gets delivery charges, so it’s a clear win-win situation for both. So, money through delivery charges is one of the most crucial income streams for Swiggy.
Food Commission From Restaurants
Since Swiggy is giving business to local restaurants, they charge a food commission for the same. For every order through Swiggy, its profit share is approx 22 to 25% of the total bill, including the GST.
The exact commission depends upon a variety of factors, spanning from the number of orders, commission charged by the competitors, restaurant location, etc. the food commission from the listed restaurants is the biggest contributor to their surging revenue numbers.
Advertising Both Offline and Online for Restaurants
Third on the list of revenue streams for Swiggy has been the online and offline advertising for their restaurant partners. Swiggy offers two categories of advertising to their listed restaurant, one is the Priority Restaurant Listing and the other being the Banner Promotions. Swiggy displays banners and promotes restaurants based on location and rates. They charge a premium fee which adds up to their revenue stream.
Swiggy has launched the instant pick-up and drop-off service, known as the Swigger Go. This service is completely detached from their usual online food ordering service.
Here the Swiggy delivery executive can pick up and drop off anything like lunch boxes, forgotten keys, and laundry from anywhere to everywhere, in the city. It was a concept that is quite popular amidst the COVID-19 pandemic, and people, especially the elders, those who didn’t want to step out of the house used the service quite effectively.
“Swiggy’s vision is to elevate the quality of life of urban consumers by offering unparalleled convenience. After enabling this with food delivery for five years and stores across the city with Swiggy Stores, Go will open the Swiggy delivery superpower to all consumers in the city,” Sriharsha Majety.
Swiggy earns its fair share of revenue via its various subscription packages. These subscriptions offer several benefits to their customers, therefore, they don’t hesitate to purchase them. For instance, the Binge Plan of Swiggy offers unlimited deliveries with buy one and get on food dishes from their partner restaurants at Rs329 per month.
The Rs 89 Bite plan provides five free deliveries for one month. Such subscriptions ensure that users don’t have to pay extra money for delivery charges during high-demand or rainy days.
Swiggy Access is a one-of-its-kind plug-and-play campaign to bring tasty food closer to their customers while allowing food entrepreneurs to expand their business. Swiggy has created kitchens that offer the basic facilities that a restaurant needs to operate in another location.
Swiggy does charge can rent or deposit for the same. However, the restaurants have to pay a high average commission. The Swiggy cloud kitchens serve popular restaurants with limited funds to expand their customer reach without taking a bank loan to set up a new restaurant in another location.
Swiggy CEO Sriharsha Majety said,” With Swiggy Access, we are diversifying local palettes, bridging geographical gaps in supply and solving for variety, quality, and convenience of food.
Business Affiliate With Multiple Payment and Processing Partners
Swiggy has partnerships with some of the top-rated financial institutions, including PhonePay, Mobivik, Freecharge, and PayTM. Usually, Swiggy makes a percentage of the transactions, and if you look at Swiggy’s volume of online orders. It can be said that this revenue stream brings in a hefty amount of money too.
What is Swiggy’s Future?
The future of Swiggy isn’t just about cheap food deliveries. The company’s revenue is well past the $1Bn mark, and now they are looking at diversifying their business. Swiggy is planning to expand big time by creating a super delivery App in the eCommerce space that offers food delivery, movie ticket booking, lifestyle services, payments, travel tickets to ride-sharing.
Swiggy was hit hard by the second wave of coronavirus in India, as they had to let go of approx 1500 employees, across their multiple Access Kitchens. But, they did lose hope, as they invested in non-food deliveries to gain 30% of its recent revenue. As per the CEO of the company, they are going to experiment and invest in new ventures with caution.
Swiggy is hopeful of returning to the pre-COVID-19 situation as their vaccination drive is gaining pace in India. Food entrepreneurs will have the confidence to set up their results, and the order volume will gain soar, till then the company has to show patience. With the couponing country’s festive season and people returning to their offices, online food ordering will scale new highs. The company’s target of the $4.4-billion mark would be either in December this year or March year, it mainly depends upon how the outbreak will play out in the next couple of years, till then fingers are crossed.
Swiggy has a recent partnership with ICICI Bank for digital payments wallet is a mode that will give Swiggy the breathing space to survive during the tough times, when the food business revenue is going down.
Cloud Kitchens could help Swiggy reach non-metro cities like Mysuru where they experienced a food volume growth of 120%. In the coming months, we will know where the future of India’s first food delivery platform is headed.
Finally, this case study of Swiggy should suggest that if there is an idea, they must have real determination to be successful in today’s neck-throat competitive market. And, this is what two of the founders did to be the undisputed king of the food ordering industry.
They are not stopping here, it’s just one lap for them, as they are diversifying their logistic business with doorstep delivery of emergency items such as groceries, medicines, etc. What are your views on the journey of Swiggy, share them with us in the comment section below.