NEW DELHI: The ongoing campaign by the National Restaurant Association of India (NRAI) against food aggregator Zomato’s dine-in discount offering — Zomato Gold — is unlikely to have a substantial impact on the platform’s business, analysts say pointing out that only around 7 per cent of the company’s estimated revenues this fiscal are expected to come from the Zomato Gold programme.
“We think this event (NRAI’s #LogOut and #ZoGoIsNoGo campaign) has more reputational risk than actual business risk, as only a small proportion of Zomato’s revenue comes from Gold subscription,” say Prince Poddar and Swapnil Potdukhe, analysts with JM Financial Services in a research report.
Other industry experts agree. “The revenues from Zomato Gold are still pretty low for the company, even though it has been adding a rather large number of subscribers to the programme since its launch. At less than 10 per cent, even if its revenues from the programme are halved due to the campaign, the overall impact on revenue growth will be muted,” said a senior industry executive.
NRAI had initiated a #LogOut campaign against Zomato Gold and other discounting programmes by food aggregators earlier this month. While Zomato had consequently tweaked its Gold plan to curtail discounts, the association had refused to accept the tweaks, launching another protest campaign called #ZoGoIsNoGo, urging members to sign out of the platform.
According to JM’s analysts, Zomato is expected to finish the current financial year (FY20) with around 2 million Gold subscribers globally, double that of the 1 million at the end of FY19 and 170,000 as of the end of FY18. At Rs 1,200 per year (or USD 17), the total revenue from Gold is pegged at USD 34 million for FY20, just 7 per cent of the estimated total revenue of USD 485 million. “We therefore believe the recent events should have marginal impact, if any, on Zomato’s business operations and valuations,” they said.
But, industry experts also warn that the food aggregator could begin feeling the heat if enough of its restaurant partners sign out of the platform itself and not just Zomato Gold. According to sources, the food aggregator had around 6,500 restaurants on the Zomato Gold programme before the protest campaign was begun.