HomeBusiness ModelsSwiggy Business Model: How Swiggy Makes Money

Swiggy Business Model: How Swiggy Makes Money

India’s food delivery industry is a duopoly, with Zomato & Swiggy controlling most of the market. This duopoly has not only been enriching its position in the food delivery segment but also looking to expand beyond the delivery segment.

In our piece on Zomato’s business model, we discussed the three key pillars that drive Zomato’s revenue — Food Delivery, Dining Out & Sustainability, and the company’s vision to build new core segments.

In this piece, we will look at the different business segments Swiggy has launched since its founding in 2014 to understand Swiggy’s business model better, but before we do that, let’s learn about the founding story of Swiggy to establish a better context.

How Swiggy Started 

Most of us know Swiggy is in the food delivery business, but the startup’s parent company Bundl was initially focussed on e-commerce logistics. Started by Sriharsha Majety & Nandan Reddy, Bundl was born out of the idea to start a business that would be a mix of technology jobs & offline jobs. 

“We thought that we will find that competitive advantage by being not just a pure software company or not just a pure offline company,” said Sriharsha in an interview with YourStory. At that time, the logistics & shipping sector within the e-commerce industry was unorganized, which is why the two founders decided to go after that market. 

However, it wasn’t easy because they had trouble finding a technology partner. Since nobody was willing to join their venture, they had to hire a contractor to build the product. But by the time they came out with the product, the market dynamics had changed with companies like Flipkart & eBay shipping products themselves.

“That’s when we knew that we had to change our focus and it wasn’t worth the opportunity cost. Thankfully, we didn’t have any employees, investors and liabilities at that time,” said Sriharsha on their decision to quit building Bundl, a year after they had started working on it.

After shutting down Bundl, the two founders reflected on what the failed venture had taught them. Realizing that the logistics industry was inept in using technology, they started Swiggy, a company that would operate at the intersection of technology and logistics.

Around the time Swiggy entered the food tech market, the segment witnessed a boom period. New entrants, like TinyOwl and Foodpanda, were expanding quickly, backed the investors who looking to make money off the imminent food tech revolution. At the same time, Zomato was already the established leader in the food tech market, even though it was only a restaurant discovery platform back then. 

A few years down the line, by 2016, TinyOwl & Foodpanda were acquired after they failed to scale by themselves successfully. Other food tech startups failed as well, but, amidst all this, Swiggy managed to scale and stay afloat, like Zomato. 

So what did Swiggy do differently than the startups that started around the same time as it did, and how did it survive the food tech bloodbath of 2016? Well, the answer lies in the way Swiggy pursued scale. 

A key differentiator of Swiggy’s strategy was establishing product-market fit in a small geographic region before venturing to develop a presence elsewhere. In its first year, Swiggy delivered 1000 orders a day, but most of these came from Bangalore. 

Swiggy grew 2x from thereon, with the growth rate increasing after its $2 million seed round. Swiggy raised another $16.5 million round in a few months as the company began to onboard its delivery personnel, allowing Swiggy to exercise increased control over the user experience. By mid-2015, Swiggy was handling 70k orders/month.

After the funding, Swiggy only scaled to 7 cities, abiding by the Peter Theil maxim of “Monopolize a market before scaling.” TinyOwl, on the other hand, was operating in 18 cities at the time. But Swiggy’s mindful growth strategy gave it an edge in the long run. 

TinyOwl eventually got acquired by Runnr; Swiggy continued to grow due to its mindful scaling and raised another $35 million round in January 2016. 

By mid-2016, the company had scaled to 1.2 million orders a month, a massive jump from the 70k orders/month it was facilitating in mid-2015. 

While Zomato also entered the food delivery space in Sep 2015, Swiggy still won the food delivery war, at least in terms of the number of daily orders.

ZomatoVsSwiggy Daily Delivery Order Growth from 2016 to 2019
Source: ajuniorvc ( Visual by Abhinav Ghosh )

The daily delivery numbers took a hit due to the pandemic. However, Swiggy was still able to maintain its existing lead. According to a May 2021 report by DNA, Swiggy was handling 1.5 million daily orders, 0.3 million more daily orders than the 1.2 million by Zomato.

To leverage its expertise in logistics and delivery, Swiggy also expanded its ambitions beyond food delivery. Swiggy had perfected the use case of delivering food. The same infrastructure could also be expanded to serve the daily grocery needs or deliver anything people wanted to be delivered from point A to Point B. 

In 2020, Swiggy launched Swiggy Go (Now Swiggy Genie), an initiative under which the company’s customers can get anything delivered from one place to another. In the same year, the company also launched an instant grocery delivery service called Instamart using a network of dark stores.

Amidst the growth, Swiggy has seen in its food delivery business and its attempt to expand to becoming a logistics company, the company also launched and shut several services like Swiggy Pop(single-serve mean offering to students and office goers) & Swiggy Daily(home-cooked meal delivery services).

In 2017, Swiggy also embraced the cloud kitchen trend under the name Swiggy Access. The company floated virtual kitchens run by themselves and helped other restaurants launch their own cloud kitchen facilities. Even though Swiggy’s cloud kitchen segment showed promising signs, the company had to shut down three-fourths of its cloud kitchens due to the pandemic. 

As of 2022, Swiggy already sits in one of the leading positions in the food-tech space along with Zomato, with future potential to capitalize on its delivery infrastructure and leverage the imminent cloud kitchen boom.

Swiggy’s Business Model

Swiggy makes money from the following seven business segments: Food delivery, Swiggy app advertising, Swiggy Access Cloud Kitchens, Swiggy One Subscription, Instacart ( Swiggy’s Grocery & Other Household item Store ) & Swiggy Genie ( Package Pick & Drop Service) & affiliate income.

Let’s look at each of these segments individually to understand them better.

Food Delivery

In exchange for playing the role of a middleman, Swiggy charges both the hungry customers & restaurants. 

Typically, restaurants are charged 22% – 25% commission on the order bill amount, the percentage of which varies on the basis of different factors — the number of orders received, restaurant location, commission charged by competitors, etc. 

In an effort to get restaurants to list exclusively on Swiggy, the company also offers a discount of 2-3% on the food delivery commission.

On the customer side, Swiggy does not have a minimum order value, leading to an increase in the logistics cost per order. 

So, once the company had established a strong foothold in the food delivery space, it started charging customers a nominal delivery fee to customers as well, which depends on the order amount.

During times of high demand, special occasions & midnight delivery, Swiggy even charges a surge fee to customers in select markets.

Advertising

Similar to its competitor Zomato, one of the ways in which Swiggy generates revenue is by selling the attention aggregated on its app to restaurants looking to market themselves. 

Swiggy allows two different kinds of advertising across its web and app properties — higher priority listing of restaurants & banner promotions.

Swiggy ads work on a Cost per click model, meaning advertisers only pay if users click on their ads.

Swiggy Access ( Swiggy Operated Cloud Kitchens )

In Nov 2017, Swiggy launched Access, a program to house multiple restaurant partners under a Swiggy operated central delivery kitchen facility in order to help partners expand to neighborhoods they don’t operate in. 

For partner restaurants, the upside of joining Access is that Swiggy does not charge them rent or deposit, helping them save up to 25% of their operational costs.

Restaurant partners, however, have to pay a higher commission for food delivery compared to restaurants that operate on the regular marketplace model.

Other than restaurant partners, the central kitchen also hosts brands operated under the Swiggy label. Think of the model as being similar to Amazon’s online marketplace where it not only hosts sellers but also sells products under its own brand label.

Explaining how Swiggy Access leverages technology, Vishal Bhatia, head of Access told YourStory in an interview, 

“One of the things that helped us is that we have spent a lot of time in understanding and analysing the demand in particular areas. Thus, we make sure the partners move to the right locations. We also do a lot of due diligence before setting up a Swiggy Access kitchen in a particular area. 

The location is pinpointed purely basis hyper-local demand. So, even if we move the kitchen location a few kilometres away, the entire demand profile shifts. Then we bring in the intelligence in choosing the right partners basis the kind of cuisines that will do well. 

Once the partner is in the kitchen, we focus on just setting them up for operations. We also invest in IoTs that helps bring down the partner expenses like fuel and electricity consumption. As we move along, we will invest more to help partner operations.”

By Nov 2019, Swiggy Access had grown to a 1000 kitchen facility, housing 150+ restaurant partners & 400+ restaurants. However, as we stated earlier, the pandemic forced Swiggy to scale down its cloud kitchen network by three-fourths.

Swiggy One 

A subscription program, Swiggy Super gives subscribers access to unlimited free restaurant food delivery on orders above 199, unlimited free delivery on Instamart orders above 99, and 10% off on delivery fees above Rs 35 for Swiggy Genie, and other discounts. At the time of writing, the service is priced at Rs 75/month.

Instamart & Swiggy Genie

As we saw earlier, Instamart & Swiggy Genie are both Swiggy’s attempts to go from delivering food to delivering anything. Instamart is Swiggy’s grocery and daily essential delivery service & Swiggy Genie enables customers to get anything delivered from one place to another. Both these services make money from delivery fees.

Affiliate Income

Swiggy also makes money from affiliate income in exchange for promoting financial services of of financial institutions like Citibank, HSBC, and ICICI Bank. The partnership allows Swiggy users to receive credit card offers from Swiggy’s financial partners.

Swiggy Revenue & Profitability

In FY21, Swiggy’ revenue from operations dropped by 26.6% to Rs 2547 crore as compared to the Rs 3468 crore the company generated during FY20.

Rs 1562 crores of the revenue was generated from restaurant service fees, Rs 117.30 crores from delivery fees charged to customers, Rs 83.30 crore, from the sale of other food products including private label cloud kitchens, 146 crores from advertisements and the remaining 121 crores came from lead generation & other sources. 

Here’s what Swiggy’s revenue numbers looked like in FY20 & FY21 in a segment-wise fashion: 

Swiggy Segment Wise Revenue Breakdown for FY20 & FY21
Source: Entrackr

Swiggy spent Rs 4139.4 crores in FY21 to make the Rs 2547 crores it made, meaning it recorded a net loss of Rs 1617 crore. Here’s how Swiggy’s FY21 losses compared to FY20 losses.

Swiggy Revenue, Expenses & Loss ( FY2020 & FY2021 )
Source: Entrackr

After its last funding round of $700 million in January 2022, Swiggy was valued at $10.7 billion. Swiggy also plans to go public by the end of FY23, aiming to raise $1 billion (7690 crore) through the listing.

Read More Case Studies

TikTok Business Model Case Study

BYJU’s Business Model Case Study

Zomato Business Model case Study

Summary
Swiggy Business Model: How Swiggy Makes Money
Article Name
Swiggy Business Model: How Swiggy Makes Money
Description
Swiggy makes money from the following seven business segments: Food delivery, Swiggy app advertising, Swiggy Access Cloud Kitchens, Swiggy One Subscription, Instacart ( Swiggy's Grocery & Other Household item Store ) & Swiggy Genie ( Package Pick & Drop Service) & affiliate income.
Author
Publisher Name
WhatIsTheBusinessModelOf
Publisher Logo

Hey 👋

I'm a digital marketer working 5 days a week as a salaried employee & writing business blogs on weekends.

My goal is to turn this blog into a full-time gig. But for that to happen, I need it to generate as much revenue as my salary to protect the downside.

To be transparent, I currently make money with ads, but it isn't enough to transition to working full-time.

Why do I want to work full-time on the blog if I can carry on writing on the weekends?
Two reasons:

  • My blog gets more than 20000 monthly visitors, most of them through search. The only bottleneck to growth is the amount of time I'm able to dedicate to the project, so working full-time will help me scale and turn it into my primary income source.
  • Working on projects of my own opens the door to unlimited personal and financial growth.

If you've found value from reading my content, feel free to support my dream in even the smallest way you can.



Muaaz Qadri
Muaaz Qadri
A Proud Computer Engineer turned Digital Marketer