InfoEdge owns 18.4 per cent of Zomato and maintains a ‘neutral’ rating.

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Food delivery is another way to get into the prime ecosystem, in addition to early deliveries (online shopping), exclusive sales, and video/audio content.

Amazon has launched its much-anticipated food delivery service (Amazon Food) in Bengaluru, one year after launching it internally for Amazon employees. Although the much-delayed and restricted launch will have a minor effect on Zomato/duopoly, Swiggy’s Amazon Food will pose a danger to both players because it has the potential to disrupt an existing setup focused on profitability. Zomato is owned by INFOE, which owns 18.4 per cent of the company. Keep up with it.

Amazon’s public food delivery service is only limited to Bengaluru, with 62 pin codes covered (out of over 250). A year ago, it performed internal trials in four-pin codes. The initial roll-out in Bengaluru was mainly with restaurant chains, and it has yet to actively extend to small independent restaurants. It has 2.5k restaurants compared to Zomato’s 15,000 restaurants.

Our initial channel checks of eating places in Bengaluru recommend Amazon is charging a take rate of ~10% on order worth from restaurant partners. This is often but 1/2 what the pair (Zomato and Swiggy) charge from restaurants (22-25%), which has inflated over the years. The rise intake rate has enabled incumbents to curtail their losses, a high priority for each player. Zomato’s 1HFY21 statement suggests a positive contribution margin (Rs27/order) on continuous value optimization, rising scale, and consistent take rate (with a rise within the average order size).

Apart from early deliveries (online shopping), exclusive deals, and video/audio content, food delivery is another angle for entry into the prime scheme. Amazon’s key focus in Asian nations remains its Prime membership, which ought to enable it to sustain losses within the food delivery business. it’s not charging any delivery fee from its Prime members and is charging a marginal Rs19 for non-Prime members.

Amazon can systematically keep taking rates below the business average because it gains a further profit for increasing Prime membership at the expense of losses within the food delivery vertical. unlike Amazon, Zomato and Swiggy don’t have an unconditional interest in lower commission rates. Increasing competition (in the case of associate Amazon expansion) will result in another prolonged amount of money burn within the business. Amazon’s enlargement will create a risk to Zomato’s road to gain and result in higher ‘losses from investee companies’ on INFOE’s consolidated P&L. we tend to foresee a risk to the duopoly structure and consistent take rates within the business.

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