The billion dollar saga: The secret of Swiggy!
This is the Part-2 of the two part article I've written about the current landscape of F&B businesses in India. I advise you to read the part-1 before moving with this article.
In the previous article we learnt about the shift that technology is causing in the F&B industry and how technology coupled with cheaper mobile devices has given rise to an entirely different industry in this domain, that is of food delivery apps.
App based food delivery market is really huge and that’s why we are seeing aggressive investments in this domain. There are multiple competitors currently in the market but Swiggy seems to be leading the competition. With the leading investors backing them up and their current valuation which has already surpassed the billion dollar mark, Swiggy looks like it’s all set for slashing some market records in the coming days.
Earning the coveted title of billion dollar unicorn is something every startup dreams of but very few of them understand the importance of turning aspirations into tangible actions. At the core of it, success or for that matter big ticket valuations of any businesses/firms are purely a function of the problem solving capability they bring to the table. More the depth and precision of defining a problem and its corresponding solution, more are the chances for a business to succeed.
Once the problem is well defined, then it’s just a matter of deploying proper resources and systems to deliver the value proposition to address that problem.
How can a business or a startup do it?
For better understanding, we deconstruct and list out few pointers on how Swiggy achieved its current status.
How to standout from your competitors? What makes Swiggy different…
Solve the core problem.
The key differentiator between Swiggy and the fellow competitors is the fact they positioned themselves exclusively as a delivery facilitator service taking the logistics and delivery fulfilment problem by the horns. Previous players in the field were not so much eager on solving this problem as it had too many open ends.
Build your own competitive advantage.
The other competitive advantage is obviously their algorithm, which first checks for the number of delivery personnel available within the customer’s location and then checks for the closest possible restaurants to display against the search query, so that the time consumed in delivering the order takes lesser time. They are more focussed on getting the food delivered.
Redefine and innovate your revenue models.
Their current revenue model follows the mechanism where they charge the restaurants for the marketing on their platform and also take a percentage cut from the total value of the order. On the customer side they charge a certain delivery fee based on a case on case basis. The fact that people are not resistant in paying the extra delivery fee is a greater indication of change in customer preference and behaviour showing that people are ready to shell out more money for on time delivery.
Invest in the future.
With millions of deliveries happening on their platform every month, they are heavily investing in leveraging the latest AI and machine learning capabilities to churn and analyze the immense amounts of data that they are generating- pertaining to user likes/dislikes and preferences. These initiatives will further help them in making their app experience crisp and reduce the time the user spends on their platform searching for his regularly ordered food or trying something new.
Diversifying the existing business model:
To further add value to the ecosystem, Swiggy is also planning on building their own brands of delivery only restaurants and plug n play kitchen services for the existing restaurants as well as new brands- thereby reducing the entry barrier to a large extent and encouraging more micro entrepreneurs to build their businesses fast. This would not only bring in newer revenue streams but will also provide a cost effective platform for more and more restaurant brands to reach their customers.
Building customer stickiness:
The major metric for any of the utility apps is the user retention and repeat rate and if the current reports are to be trusted, Swiggy says a repeating user who has stayed on the platform for about 180 days on an average places five orders per month. Building a habit among the customers is the hardest thing to achieve which Swiggy has already managed to master.
All and all food delivery space is the one look out for in the coming days.
For sure, we will be getting to witness the birth of many other concepts and business model innovations which are going to give tough challenges to the traditional F&B/restaurant businesses at the same time creating more and more opportunities as well.
Let us know in the comments,
What did you learn from this article and
what are concepts that can be taken and applied to other businesses as well?