Media attention is currently focused on the two food delivery start ups, Swiggy and Zomato. Both have raised billions of dollars via venture capital funding. The valuations seem to be vaulting higher almost once a quarter, at the very least. What’s the catch? The short answer is there isn’t any. Consumers love food delivery and the restaurants hate it. I have serious doubts of how profitable the food delivery business is, the odds are that it is a ‘cash burn’ business. Contrary to popular thinking, when it comes to the ‘ gig economy’, the more cash you burn, the higher is your market valuation. The idea is to achieve a ‘critical mass’ and the network effect that follows, takes care of the profitability or the lack of it, as the case may be. The fact remains that both these start ups do not seem to have a ‘road to profitability’ as on date. Be that as it may, food delivery as a service is here to stay. And given the ‘platform nature’ of their business, they assume zero liability for the quality of the food or attendant risks attached thereto. What happens to the data that is being collected by these start-ups? They are in the process of accumulating considerable amount of data about the households that they serve. Tastes, budgets, preferences and habits can easily be inferred from the treasure trove of data that they now possess. My guess is that they do not share this data with the restaurants and therein lies their USP, if there is one.
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