Gurgaon-based restaurant discovery and food ordering app Zomato has announced that it will be shutting down its online ordering service in Lucknow, Kochi, Indore and Coimbatore.
The reason for this the company gave was the small size of these markets and said it will re-launch when the time is right.
Pankaj Chaddah, Co-Founder, Zomato, who is leading the online ordering business for Zomato, said:
“Despite Zomato’s recent marketing efforts, including television ads, it didn’t see a significant increase in the order volumes in these few cities. These smaller cities are not yet entirely ready for the online food ordering business, but once they are, Zomato will reconsider its strategy.”
Chaddah said out of total orders received on Zomato, these cities accounted for less than 2 per cent. However, the company said it is registering healthy growth with online orders growing at 40 per cent every month.
The company has also mentioned that it will not go for a job cut as it will be realigning people into other sales verticals.
Zomato launched its food-ordering business in April 2015. The company partnered with logistics firm Delhivery (SSN Logistics Pvt. Ltd) and invested in hyperlocal delivery start-up Grab a Grub Services Pvt. Ltd to facilitate food delivery.
Zomato has expanded its food-ordering business in global markets too such as the United Arab Emirates (UAE), the Philippines, Australia and South Africa.
Zomato has 75,000 restaurants listed on its platform in India. Foodies can use the online ordering feature to order from 12,000 of them. The company also offers services such as Table Reservations, a Whitelabel Platform and a Point-of-Sale system, creating technology to connect restaurant businesses and customers.
The decision taken by Zomato highlights the problems faced by these food-tech start-ups. In addition to low demand, the funding slowdown has also taken its toll on these cash-hungry firms, forcing several of these to either closing down or getting acquired.
Many early-stage start-ups in food-technology are shutting down after failing to woo institutional investors.
Internet-first kitchen Spoonjoy (Emvito Technologies Pvt. Ltd) and restaurant aggregator Dazo had shut shop in October after they failed to raise substantial funds.
The list of investors backing both Dazo and Spoonjoy was impressive. Dazo had Amazon India chief Amit Agarwal, Google India chief Rajan Anandan, Commonfloor’s Sumit Jain, TaxiForSure’s Aprameya Radhakrishna and Alok Goel, managing director at SAIF Partners as investors.
Spoonjoy was backed by Flipkart co-founders Sachin Bansal and Binny Bansal, Flipkart’s former chief people officer Mekin Maheshwari, Tracxn’s Goyal, Sahil Barua, co-founder of Delhivery, an e-commerce logistics firm and SAIF Partners.
According to experts, investors are in a wait-and-watch mode because of too many investors jostling for a particular segment.
Zomato, which started out in 2008, has so far raised about $224 million from Sequoia Capital and Info Edge (India) Ltd, among others.