Two years ago, many eyebrows were raised when Zomato said it would acquire a struggling quick-commerce startup, Blinkit - formerly Grofers. Many critics questioned it: Could the food delivery giant somehow succeed in the highly competitive quick-commerce space? Today, Zomato has proved its critics wrong. Blinkit has survived and thrived, reporting an astonishing 130% YoY GOV growth in the last quarter (Q1 FY25). "It's been such a reassuring story that Zomato is now looking to bet big on its next territory—going out.
District is an all-in-one app called Zomato's next biggie, that promises to make the 'going out' experience revolutionized. The app would compile services like dining, movie ticket bookings, live performances, sports events, shopping, and even staycations, under one roof. Building its two strong arms, dining out and ticket booking events, Zomato would help all those wanting to 'step out for fun and entertainment'.
Blinkit is the template Zomato goes by as far as its approach to District is concerned. Many thought that when Zomato first bought Blinkit, that was a non-player in quick commerce and would never compete with the likes of Swiggy Instamart or BigBasket. However, Blinkit has seen huge leaps and bounds with massive YoY growth, and Zomato thus positioned it as a brand in its own right, with its own app. Now, it seems Zomato hopes for the same in the treatment of District.
This is an approach that has been a mainstay for the company's strategy around Blinkit, but it is the plan - to leverage traffic from the main app for District-that the leadership of the company reiterated on the Q1 FY25 earnings call. The overall belief will be that this helps keep customer acquisition costs low-an important consideration when scaling any new business.
The user base of urban millennials and Gen Z will form a frictionless audience for District. According to Karan Taurani, Senior Vice President at Elara Capital, "Zomato has already built a huge following among the groups, so it's well-positioned to cross-sell new services to its existing customer base.".
So, what does District offer? District is going to be a single app that will integrate everything that could fall under the category of 'going out'. Whether it's booking a table at a restaurant, movie tickets, live music concerts, or a weekend getaway, District promises to address all of these.
Zomato Chief Executive Officer Deepinder Goyal has big aspirations for District - he describes it as a potential "game changer" in the going-out space. Goyal wants to build District as the third big B2C vertical for Zomato, following the company's food delivery and quick-commerce businesses. "I think this is an untapped market; with this, we are going to create a new stream of revenue," he says.
Presently, the 'going-out' vertical of Zomato focuses on two key areas. These include the dining out and Zomato Live segments. The dining out segment allows users to discover restaurants and make table reservations. It also allows users to pay for their experience at the restaurants. On the other hand, the Zomato Live segment is a ticketing platform for events like food festivals, concerts, and any other kind of live performances. During FY24, the 'going-out' segment of Zomato recorded revenue of INR 258 crore with an increase of 51% from INR 171 crores in FY23. Then, the district is looking forward to adding more use cases such as movie ticketing, sports events, shopping, and even staycations, thus making it possible for a lot of services to be obtained by the users on one platform.
One of the company's strengths is a strong and interactive customer base. The company has gathered a huge following over time by its flagship food delivery application and quick-commerce service, Blinkit. Additionally, the introduction of its Zomato Gold loyalty program, which offers such benefits as exclusive deals and waived delivery charges, has increased loyalty among customers. With such an enormous and interactive base of users, Zomato has the potential to cross-sell services by District to millions of already existing customers.
This is a similar strategy that can be employed with District to grow the customer base," said Kush Ghodasara, independent market expert. According to him, the success of Zomato with Blinkit lies both in the effective execution and the understanding of the Indian consumer.
This also brings in the issue of timing as the online ticketing market is growing at 15-20% year on year in India. Currently, the platforms taking most of this market share are BookMyShow; however, Zomato's vast customer base presents a huge opportunity to disrupt the market. The convenience fees of the online ticketing market are expected to be INR 1,500 crore, of which Zomato will definitely take some share.
On top of this, the pan-India cinema market amounts to approximately INR 12,000 crore, whereas the live events market is at around INR 10,000 crore. District unifies different ticketing services that Zomato can then penetrate through these markets and built as a hub for entertainment.
The events business is primarily known for its volatility. While it provides Zomato with a huge opportunity, it comes with challenges. Even large players like BookMyShow had problems scaling up past the INR 1,000-crore revenue mark. For Zomato, it will be handling the issues of customer acquisition cost and managing profitability for long-term success at District.
But analysts are optimistic. If the marketing and advertisement costs are included in the bill, costs for the district are expected to increase 8-10%, Ghodasara said, and that will partly be offset by strong margins coming in from Zomato's food delivery business and Blinkit, she said. Still, this is a short-term increase in costs and isn't going to have any material impacts on profitability going forward for Zomato.
With District, Zomato is now aiming to become the online gateway for going out, just as it has in food delivery and quick commerce. By offering one-stop convenience for the needs of going out, the company may therefore be building a new, meaningful profit source capable of fueling company growth as its food delivery business matures.
In the weeks ahead, Zomato will see the official launch of District, and everyone will be eyeing it to see if it can replicate Blinkit's success. With a strong execution record of loyal customers, an ever-growing market for entertainment and events, District is indeed another huge success story under Zomato's belt.
As Goyal aptly put it, "If we execute this well, going out could become the third large B2C business to emerge out of Zomato." And with the launch of District just around the corner, Zomato is ready to take on its next big challenge. Stay tuned as this exciting new chapter unfolds.
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