There is an increased demand for on-demand food in India, which will result in more investment into online food delivery companies. Swiggy and Zomato – the two biggest players in the online food delivery ecosystem – will continue to attract considerable investments at high valuations. However, this year may also witness investments into other mid-tier online food delivery companies and businesses that are engaged in the ready-to-cook/eat categories.
Competition in this sector is likely to increase as more technology companies foray into the online food delivery space. Ola, Uber and Google are the recent entrants in this sector – either directly or through their portfolio companies. As the competition heats up, we are likely to see increased M&A activity in this sector. More established online food delivery companies will acquire competing companies to consolidate their position and/or win a bigger chunk of the market share.
It is expected that more funding will also result in increased use of technology. Companies will spend more to incorporate suitable additions and features to their apps in order to meet changing customer preferences, and to enhance the overall customer experiences. Companies are also likely to engage in more innovative ways to reduce their costs and time for food delivery, including investing in drone-based food delivery processes. Overall, suitable use of technology will benefit the consumers and also result in increased orders and improvement in the top line of the online food delivery companies.
Companies are likely to face increased regulatory scrutiny. The Food Safety and Standards Authority of India issued detailed guidelines for licensing online food operators. There are also allegations of competition law violations by certain food delivery companies. However, the regulatory uncertainty is unlikely to adversely impact this sector. Large online food delivery companies are already well compliant with the regulations and are closely tracking legal changes.
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