Naive question about some business models
Uber , AirBnb , SWIGGY, Zomato etc are "Comission" or "Bicholia" Companies. Why do they keep losing money? They should make money even if they are to provide attractive offers to drivers/delivery guys etc Is it because they spent too much "Growing" and its impossible to make the money back? How did this happen.
incognito
Stealth
2 years ago
Simply put, the 'unit economics' of some of these business i.e cost to deliver one meal are not profitable.
The general idea was that with enough demand (users) and supply (taxis, restaurants), the cost of running the service delivery would go down.
But it turns out that costs only go up on the supply side when the business spends to aquire new users.
Possible to make these businesses profitable if they charge more fees to users and suppliers, covering the deficit. However, doing so causes users/suppliers to churn and increase fraud.
Once unit economics are positive, they need to also work on making sure they have an overall profit margin considering other business overheads.
Once that is done, the business can pay back it's loans and perhaps even it's investors.
was watching a valuation video by Aswath Damodaran for Zomatao.
It made me go through the zomato prospectus. Their marketing costs are HUGE ( maybe thats cost of acquiring customers). And they take around 23% of order value as comission. Bicholia businesses have very limited size , they should have known that.
They cannot become a middleman like say VISA or MasterCard. They are very regulated markets and regulations will ensure monopoly which can be sustained by bribing governments - Even then, UPI has them by balls.
Food delivery is not regulated and can never be.
I am expecting to see Zomato selling Mutual funds on its platform very soon.
incognito
Stealth
2 years ago
I see it like this:
The reason many restaurants did not previously offer delivery before these platforms existed is because it was cost prohibitive to do so.
Realistically getting a human to bring you a meal worth 300inr should cost you as much in fees.
Being a delivery middle man does give the cost advantages in the form of gig workers. But as you have observed, the costs of advertising the service to consumers coupled with costs of maintaining the gig workers all over India is not working out positively. At least not without charging significantly more.
Reality is that food delivery should only be affordable to the top 5% of India, only deep discounts are keeping it mass market.
See more comments
Nigus7
Stealth
2 years ago
Simple si baat hain , india men marketplace model hasn’t worked till yet. Disposable income bdhega Tabhi kuch hoga for such economies of scale businesses
RattuTota
Stealth
2 years ago
These people have become a destination for acquiring users for banks/NBFCs and they are selling their user data to them now. This is how they will monetise
There’s a very good video on the economics of Uber and related middle men “disruption” companies
https://youtu.be/ajHg97qx4r0
https://youtu.be/IlZ51zeabhM
