Zomato expands horizons with new ’District’ app amid strong earnings

Bengaluru: Food delivery giant Zomato launched a new app 'District' on Thursday, targeting an expanding 'going out' segment, including movies, shopping, and staycations, as part of its efforts to broaden its services beyond traditional food delivery. The launch comes amid a staggering rise in the company's fiscal first-quarter (Q1FY25) net profit.

Currently, Zomato’s dining-out business, which allows customers to discover restaurants for dining, boasts an annualized gross order value exceeding $500 million and is profitable. 

“We believe there is an opportunity to expand our going-out offering further, building on top of our dining-out business,” Zomato’s chief executive Deepinder Goyal said, adding that there are other additional use cases emerging in the going-out space, including sports, ticketing and live performances.

Zomato plans to utilize its app's existing traffic to build 'District' as a separate brand. 

“It's going to be pretty much like how we build Blinkit. It will be a separate brand and app, but we will make sure that we keep our customer acquisition lower, using the traffic that we have on the Zomato app,” the company’s head of corporate development Kunal Swarup said in the earnings call.

Quarterly report

Zomato’s net profit surged to ₹253 crore in the three months through June, from ₹2 crore a year ago, driven by higher gross order value across its food delivery, quick commerce, and going-out verticals. 

The quick commerce vertical led the growth with a 130% increase in gross order value, while the food delivery and going-out verticals grew by 27% and 106%, respectively. 

Zomato reported consolidated quarterly revenue of ₹4,442 crore for the April-June period, compared to ₹2,597 crore a year earlier.

“Very strong set of numbers, both on food growth and on quick commerce, driven by good margin execution…Overall, we will see an upgrade in Zomato’s consolidated company in the range of 10-15% because of strong performance and a healthy outlook for both growth and profitability,” Karan Taurani, analyst at Elara Capital.

Blinkit expansion plans

Blinkit, Zomato's quick commerce unit, has ambitious plans to establish 2,000 stores by the end of 2026. 

“Most of these stores would be in top 10 cities in India. Beyond the large cities, the size of the market is still undiscovered,” Blinkit co-founder and chief executive Albinder Dhindsa said in a statement.

He emphasized that the expansion depends on factors such as speed, execution, and supply chain efficiencies. “If everything goes as planned, we aim to have 2,000 stores, latest by the end of 2026, while remaining profitable,” Dhindsa added.

Read this | Zomato: It’s time for investors to open their eyes to Blinkit

Currently, Blinkit’s average gross order value (GOV) per store has increased to around ₹10 lakh, up from ₹6 lakh per day per store when it had 383 stores. The top 50 stores report ₹18 lakh per day per store, with growth continuing.

“We believe that most of our stores today are under utilised from a capacity standpoint and hence GOV per day per store should continue increasing from here even as we aggressively scale store count. From a demand standpoint, customer wallet share should keep increasing as we expand the selection available on our platform,” Dhindsa explained.

Blinkit is also focusing on increasing the variety available to customers. The average selection in any neighbourhood store has expanded 4-5 times over the last eight quarters, with up to 25,000 unique SKUs (stock keeping units) now available in some locations, he said. 

This expansion has largely occurred outside the traditional grocery segments of FMCG, fruits & vegetables, and staples. 

In recent quarters, Blinkit has launched and scaled products across categories such as electronics, beauty, makeup, pet care, toys & games, and plans to continue investing in newer categories. 

However, Dhindsa clarified that Blinkit is not taking market share from kiranas or retail players like DMart, as replicating value-focused items, especially in categories like staples where price sensitivity is higher, has proven challenging.

Zomato’s food delivery business experienced a slight contraction in its contribution margin, down to 7.3% from 7.5% in the previous quarter, due to factors like seasonality and external events such as heatwaves and elections. Despite this, the company remains confident in achieving a 4-5% Ebitda margin. 

More here | Zomato is winning the contest with Swiggy

“We don’t have a timeline but we continue to invest in growth.. Many variables including demand over the last two years have been unpredictable and there is competition…while we are not very far from the target, we will get to that range hopefully in a few quarters from now,” the chief executive officer Akshant Goyal said in the post-earnings call with analysts.

Zomato has also been experimenting with platform fees, incrementally increasing it from ₹2 to about ₹6. Other delivery platforms like Swiggy have also introduced similar fees to offset costs and boost profits.

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With additional inputs from Sowmya R.