Zomato's Gold program boosts market share against Swiggy: HSBC report

According to a note by HSBC Global Research, Zomato has been able to regain its market share against its competitor Swiggy, following the reintroduction of its loyalty program.

This comes after Zomato had lost some of its market share to Swiggy in the second half of 2022.

Zomato, based in Gurgaon, reintroduced its loyalty program, Zomato Gold, in January. The company had previously replaced the subscription program with Zomato Pro almost 30 months ago, and Zomato Pro was discontinued last year.

The new Zomato Gold membership can be purchased for Rs 149 for a three-month subscription, which is a discounted rate compared to the quarterly membership fee of Rs 999.

HSBC Global Research reported that during the January-June 2022 period, Zomato held a 55% market share, while Swiggy held the remaining 45%. However, during the October-December 2022 quarter, Zomato's market share decreased slightly to 54%, with Swiggy holding 46%.

The report predicts that Zomato's market share will rise to 57% in the fiscal year 2023-24 (April-March).

According to HSBC Global Research, Zomato's contribution margin may be negatively impacted by Zomato Gold during the ongoing January-March quarter.

HSBC Global Research noted that there may be a negative impact of Rs 10-12 per order from Zomato Gold, starting from the fourth quarter of the fiscal year 2023. This could be a concern for investors, but HSBC believes that Zomato can counter this impact by pursuing higher take-rates (commission) and cost-cutting measures.

Zomato's contribution margin for the period of October-December was reported as Rs 21.50 per order.

According to the HSBC Global Research report, Zomato's EBITDA margins are expected to improve in the upcoming quarters despite the impact of Zomato Gold. Additionally, the report noted that Swiggy is currently burning more cash than Zomato.