Swiggy was launched in the year 2014 and when it entered the online food delivery market space, there were already many companies running online food delivery businesses and experts thought it was too late for Swiggy to enter the market. During that period, the online food delivery market was not very attractive and that is why Zomato had decided, not to expand its delivery business. This helped Swiggy capture the Indian market and today it is in the list of Indian unicorn startups after raising $210 million at a valuation of $1.3 billion. A unicorn is a privately held startup company, valued at over $1 Billion. This has also led Zomato to invest millions of rupees to compete with Swiggy.
These are the reasons Swiggy has become India’s fastest unicorn
High concentration on logistics
The main reason behind Swiggy's success are its outstanding logistics operations. Swiggy has a sharp focus on its logistics and this has helped them gain more customers and with it confidence. When Swiggy entered the food delivery market, other startups were not concentrating on building a supply chain. Other restaurant aggregators such as Zomato, TinyOwl and Foodpanda were just connecting restaurants with the customers, but they were outsourcing logistics operations to either third-party logistics providers or restaurants. Swiggy had understood that the only way to capture the food delivery market was to build a good logistics network in-house. Today, almost all the restaurant aggregators are building their own delivery fleet.
Catching the trend
Proper timing is very important in any business. Swiggy captured the Indian online food delivery market, when there was a need for trustworthy startups in the industry. As soon as Swiggy was launched, it was able to create a buzz and its customer base started increasing rapidly.
Ensure it’s sustainable
Let's take an example of TinyOwl. TinyOwl was mainly dependent on discounts and promotions. It did not have its own delivery fleet and relied on the restaurants to deliver the food. Also, it did not enjoy brand loyalty with the restaurants. As the result when the funds started drying up, it had to cut down on discounts and this led to users shifting to other brands. TinyOwl later merged with Roadrunnr, to create Runnr, which has been acquired by Zomato.
According to regulatory documents filed with the Ministry of Corporate Affairs, even though order volumes received by Swiggy were high compared to rivals, the company’s losses jumped 65 times for the year ended March 2016.
In order to build a more sustainable business, in the year 2016, Swiggy started focusing on reducing costs by making its logistics network more efficient. It also outsourced some deliveries by tying up with third-party logistics players. It increased delivery costs and indulged in surge pricing during peak hours.
The efforts by Swiggy started paying dividends. Many people started using Swiggy often, because of its excellent customer service. In September 2016, Swiggy raised $15 million from new and existing investors. In May 2017, Swiggy raised $80 million funding from Naspers. Swiggy took just 4 years to become a Unicorn, compared to Zomato’s 8 years. You must be familiar with the fight between cab aggregators Uber and Ola. Now it’s time for the fight, Swiggy vs Zomato.