3 Tailwinds That Will Make India Online Food Delivery Market to Generate Over USD 9 Bn by 2025. Will India be able to achieve That Mark?

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3 Tailwinds That Will Make India Online Food Delivery Market to Generate Over USD 9 Bn by 2025. Will India be able to achieve That Mark?

India Online Food Delivery Market is expected to grow at 32.3% during 2021-2025, owing to the rising annual spending by middle class household, as per the findings by Ken Research

1. Annual Spending by Middle Class Household in Tier II and Tier III cities has increased from ₹ 2,500 to ₹ 52,000, 108% increase on Fast Food Restaurants.

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Focus has shifted towards Tier III and Tier IV cities; Small Restaurants dominate the market. Moreover, Average Order value is 20% lower, but is compensated by lesser economics of scale in Tier II and Tier III cities. In the future, 50% of the orders is set to come from Tier II, Tier III and Tier IV cities. In addition to this, annual spending by middle class household in Tier II and Tier III cities has increased from ₹ 2,500 to ₹ 52,000, 108% increase on Fast Food Restaurants. Furthermore, Home Made Food among Tier III and Tier IV cities expected to drive the market.

2. Rise in Migrant Working Population (20%) reason for increased demand.

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The average age of the Indian population is 29 years, indicating that there is higher concentration of the target consumers in the market. There has been rising number of migrant workers in the capital cities in India (approximately 20%); ultimately, giving a boost to the demand of food delivery. The average cab cost for traveling 5 kms in India is ₹120. Cab cost added to the food bill (~₹300 for one person) while dining out is higher than the average order value of food ordered online (₹250). Hence, people prefer ordering food over themselves going out for dinner.

3. Adoption is increasing in Tier II, Tier III & Tier IV cities significantly with nearly 73 Mn users at present (2019).

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The urban population and tier2-3 cities in the north-west belt of India holds opportunity for the growth of the market. India’s rising urban population along with people of the age in range between 15-59 total of nearly 200 Mn smartphone users, presenting an opportunity to cater around 120 mn of market potential.

Will ONDC Kill Duopoly of Swiggy-Zomato? Find out what the ONDC CEO T Koshy has to say about it: Ken Research

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Swiggy and Zomato reign supreme as the dominant players in India's online food delivery market, collectively commanding an impressive market share of around 50%. According to a Ken Research report, the journey of online food delivery market players in India began in 2006 with the pioneering ventures of "JustEat" and "FoodieBay."

Furthermore, companies like Foodpanda, Tiny Owl, Swiggy, and Uber Eats entered the market over time. But consolidation and successful exits from the market have resulted in only two players, Swiggy and Zomato sustaining in the industry. However, the player could not enjoy the leading position, tension-free for longer.

The arrival of ONDC has shaken up the top players in the Indian food delivery sector. Here is why?

ONDC (Open Network for Digital Commerce), backed by the Indian government allows restaurants to sell food directly to customers without the need for a third party and has been giving tough time to the private rivals, Swiggy and Zomato.

As per observations, ONDC has been growing rapidly over the last few weeks as daily retail orders that includes food and beverages and grocery segments have jumped over 100x from nearly 200 orders at the end of February. The hefty discount available on the platform is the key growth driver of the ONDC in the country. Its evidence is the screenshots uploaded by consumers on the internet that depicts the comparison of the food items available on Zomato/Swiggy and ONDC. An Mc Aloo Tikki Burger costs Rs 140 on Zomato/Swiggy and Rs 89 on ONDC, about 60 percent cheaper. The non-veg lovers will have to spend around Rs 398 for a Murgh Afghani Tikka Biryani on Zomato but only Rs 342 on ONDC.

Will the “discounting” strategy cut down the competition in the sector?

Presently, Swiggy or Zomato charges a commission of anywhere between 18% and 26% from restaurants whereas the ONDC platform partners charge only 2-6%. This is the key growth driver of the ONDC. But is the discounting policy here to stay?
Well, according to the CEO of ONDC T Koshy, discounting is just a short-term strategy to start the transaction but the ONDC will be driven by competition and fair practices, not unhealthy discounting in the coming years. This embarks the conversation of healthy competition in the industry. Also, it highlights the need for the market players to come up with strong customer-centric strategies in order to stay ahead of the competition.

To know the competitive landscape of the India Online Food Delivery market, download the free sample report now!

The sample report consists of a market overview, competition analysis, and also the future projection that gives you a fair idea about future opportunities that lie in the India Online delivery sector.

Rise in Access to High-Speed Internet Facilities and Boost in Sales of Smartphones to Drive India Online Food Delivery Market: Ken Research

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India is undeniably one of the biggest consumer markets globally, a rise in a number of young populations being productively employed over lucrative industries, sectors such as IT services have raised the living standards. The large-scale usage of online food delivery applications has assisted individuals in ordering and receiving the desired food products at their doorstep. It involves browsing the website or application, selecting from a wide variety of cuisines available, and making the payment through different methods. The online food delivery is a service providing the store or restaurant delivery of food to a customer through the restaurant’s website.

The customer can choose the payment mode as online and cash on delivery. The key features for making effective online food delivery system includes easy & user-friendly dashboard, social media integration, push notification, and cross-platform compatibility with the customer.

The key companies operating in the Online Food Delivery Market in India are Zomato Media Pvt. Ltd., Scootsy Pvt. Ltd., Food Panda Indian Pvt. Ltd., Foodista India Pvt. Ltd., Bundle Technologies Pvt. Ltd., UberEats Pvt. Ltd., Faaso’s Food services Pvt. Ltd., Swiggy Pvt. Ltd., Pisces Services Pvt. Ltd. Some key operating online food delivery apps are TastyKhana, JustEat, Uber Eats, Swiggy, FoodMingo, Pizza Hut, FoodPanda, Zomato Order, Fasso’s, and Dominoes. Moreover, some food delivery startups in the country are Masala Box, 48 East, Box8, and others.

Based on platform type, the market is segmented into websites and mobile applications. Based on the business model, the market is segmented into logistics based, order focused, and full-service. In addition, based on the payment method, the market is segmented into Cash on Delivery (COD) and online.

The online food delivery market is witnessing a substantial increase to a due rise in access to high-speed internet facilities and a boost in sales of smartphones. Some of the other factors associated are a rise in the working population and expanding income levels, further propelling the demand online food delivery market growth in India. However, the majority of players are concentrated in the urban regions of the country, with Bangalore, Delhi, and Mumbai representing the three largest markets, vendors are now also targeting smaller cities, as they have strong growth potential.  Moreover, the rising trend of the on-the-go food items and quick home delivery models that offer convenience, ready-to-eat, and cheaper food delivery and new options have further supported the demand from online food delivery services in the country.

The role of mobile apps and also a web-based system for ordering food playing an important role as more and more people use smartphones, followed by increasing literacy and access to Internet facilities. Owing to online delivery being cost-efficient, more operators are ready to devote their time, energy, and investments in different formats dedicated to providing delivery food at the doorstep. In addition, the use of this online delivery is leading to a considerable decrease in costs of labor, supplies, and cost-saving aspect for the need for quality real estate.

COVID-19 Impact on the Industry

Furthermore, owing to the increasing cases of COVID-19, some of the leading players such as Zomato, McDonald's Corporation, and Domino’s Pizza Inc. have now introduced the feature of the contactless delivery to the customer. All companies are adhering to WHO guidelines norms while providing services to ensure that the food reaches the customer without being touched and is delivered safely with adequate social distancing measures. All the online food delivery companies have already started an outreach program guaranteeing their customers about the safety of ordering food online.

For More Information on the Research Report, refer to below links: -

India Online Food Delivery Industry Growth

Related Report by Ken Research: –

US Online Grocery and Food Delivery Market Outlook to 2021 - Growing Popularity of Online Mode of Shopping among Millennials in the US to Foster Future Growth

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Ken Research

Ankur Gupta, Head Marketing & Communications

Ankur@kenresearch.com

+91-9015378249