The Signal - Zomato’s burden of loyalty
Zomato’s burden of loyaltyAlso in today’s edition: Adani turns the wheel of Fortune; Indian telly in shark-infested waters; AI for conflict resolution?; Toyota vs. Tesla
Good morning! If you think that it’s just our boys wreaking havoc on the playground, think again. The Bridge reports that the Indian women’s rugby team finished runners-up at the Asia Rugby Sevens Trophy. The team had a prolific run throughout the competition and lost only to the eventual winners, UAE. This is the third silver medal in three years for the women's team, and they’ve now secured second place in the world rankings. Super proud! ♥️ 🎧 Bank Of Baroda’s goose is cooked. Also in today’s edition: doffing our hats to the Indian women’s rugby team. Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts. Soumya Gupta, Jaideep Vaidya, and Adarsh Singh also contributed to today’s edition. We would like to know more about you. Participate in our annual survey by filling up this form. We’ll use your answers to tweak our products and make them more enjoyable for you. As always: you will remain anonymous. The Market SignalStocks & Economy: Optimism at the beginning of the week that the US Fed was done with rate hikes was short-lived as investors were gripped again by doubt. Shares across Asia fell in morning trade. Stock gains in Korea after a short-selling ban lasted only a day. Early GIFT Nifty movement indicated a weak opening for Indian shares as well. India is back as the second ranked emerging market on the MSCI Index. It had slipped below Taiwan after the January Hindenburg Research report took the wind out of Adani Group stocks. Seven new stocks were included in the index after a review in August, and another nine are expected to be added after the next monthly review. Morgan Stanely has said that oil prices above $110 per barrel could destabilise India’s economy, widening the current account deficit beyond 2.5% of GDP and forcing RBI to raise interest rates. CORPORATEAdani To Sell A Foundation StoneThe Adani Group is looking for buyers for its ownership stake in a business that was foundational to founder Gautam Adani’s business empire. A report in The Economic Times, quoting unnamed company executives, said that Adani will sell off its 43.97% stake in Adani Wilmar (AWL), its 24-year-old food products joint venture with Singapore-based Wilmar International. Just about a year ago, AWL was setting up Fortune Mart retail stores across India and acquiring brands after it went public in February 2022. It was even seen as an emerging rival to Reliance Industries’ supermarket chain. AWL shares have been on a steady decline after peaking at ₹809 (~$10) in September 2022 and are now trading way below their debut-day closing price of ₹381. AWL’s mainstay edible oils business is becoming increasingly tricky, with the international agri commodities trade fraught with conflict, climate change, and regulatory risks. ENTERTAINMENT
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Zomato posted its second consecutive quarter of net profit (of ₹36 crore or $4.3 million) for July-September. The turnaround has much to do with Blinkit turning contribution-positive for the first time—a significant development because the quick-commerce arm was a drag on Zomato a year ago.
Store of value: Blinkit’s gross order value (GOV) was up by 29% from June. Analysts believe this could be because of reduced store footprint, which increases store-level productivity or contribution margins (read: efficiencies). In contrast, the GOV for Zomato’s core business of food delivery was up by just 9%, relatively flat despite a surge in order volumes. Blame Zomato Gold.
The Signal
In August, Zomato followed in competitor Swiggy’s footsteps and introduced a ₹2-5 platform fee per order. But these unit economic gains are somewhat nullified by the Zomato Gold loyalty programme. In the words of Zomato CFO Akshant Goyal, “a Gold order is less profitable than a non-Gold order” despite Gold users ordering at a higher frequency than non-Gold users.
That’s because Gold offers benefits (free delivery, priority during rush hour, on-time guarantee) that are more expensive for the company to fulfil. At ₹199 for three months, the Gold strategy is also discount-driven. That explains the high adoption and order volumes.
Little wonder then that Zomato is likely to change said strategy. If it does, will it follow Swiggy yet again and extend loyalty perks to quick-commerce deliveries? If it doesn’t, Zomato may have to contend with another monkey on its back: demand elasticity.
ARTIFICIAL INTELLIGENCE
In The Trenches
Tech bros and their burning desire to ‘make the world a better place’ have been a running joke for years now. But the UN seems unfazed and has signed up with a Slovakian AI platform, CulturePulse, to “understand critical issues in the Israel-Palestine conflict”.
How?: CulturePulse will create a digital twin of conflict-relevant areas and incorporate Multi-Agent-AI (MAAI) models into it. These MAAIs are made ‘psychologically realistic’ using text data — of a subReddit, a Twitter community, or a local population. This helps them create a virtual society and run simulation tests on how the society will react to different policy nudges. But ethical challenges remain.
Sign of times: We’ve covered before how Israel is running out of friends in the war. That UN is relying on simulations to chart possible outcomes shows the burgeoning trust deficit between Israel and the UN.
Meanwhile: AI companies aren’t too keen on paying for copyrighted content.
AUTO
Audacity Meets Zen
Will Japanese carmaker Toyota and US electric car pioneer Tesla reprise the auto wars of the 1980s and 1990s? Although the world is not the same and the US is Toyota’s second biggest manufacturing base with more than a dozen plants, the prospect of a corporate rivalry driven by innovation in technology and processes is tantalising.
Financial Times reports that the two companies are upending the assembly line itself. While Tesla is revolutionising the shop floor with what its chief Elon Musk calls gigacasting technology, which casts the whole car body, Toyota is attacking the heart of the machine with its solid state batteries. Musk has also promised a better, bigger, and cheaper battery which uses dry-coat technology, a process of coating electrodes that is difficult to perfect.
While the two giants battle it out, other automakers must be sweating blood.
FYI
Fire sale: BYJU’S is reportedly in talks to sell its American kids learning platform Epic for $400 million to Joffre Capital. Another potential suitor is said to be Duolingo.
Glow up: Beauty products retailer Nykaa posted a 50% jump in net profit year-on-year as sales grew across its personal care, fashion, and wholesale businesses.
Flying high: Aircraft maker Airbus has signed agreements with four local firms to make components in India.
Red carpet’s getting ready: Multiple government departments are coordinating efforts to fast track approvals for Tesla’s entry into India by January 2024.
Desperate measures: Delhi will enforce the odd-even rule for cars in the city starting November 13 to combat the hazardous air pollution choking the national capital.
On this date: Bumble CEO Whitney Wolfe Herd is stepping down and will be replaced by Slack chief Lidiane Jones; Bumble shares fell by a record 10% after the announcement.
Poll bound: Voters in Chhattisgarh and Mizoram head to polling booths today as the first phase of elections to five state assemblies kicks off.
THE DAILY DIGIT
19
The number of nonprofits in India that earned more than ₹100 crore (~$12 million) in FY22. In contrast, 34 companies had a corporate social responsibility budget higher than ₹100 crore that same year (Mint).
FWIW
Size matters: E-commerce shoppers in the US are learning this the hard way: people are getting fed up with receiving mini variants of everyday items like door knobs, rice cookers, etcetera. In a few instances, buyers—who failed to note the dimensions or simply had an imperial-metric system mix-up—were at fault. But in other cases, sellers deliberately tricked customers into buying these cheap products. Why? Because most customers don’t really want to go through the hassle of returns and talking to customer support. Sad but true.
No fun and games: At least for the participants of the Gay Games in Hong Kong. The city became the first in Asia to host the four-decade-old sporting and cultural event for gay and straight athletes. But the organisers are facing resistance from pro-Beijing and conservative lawmakers who want to scrap the event. Some have labelled the games as propaganda for ‘Western ideology’. However, organisers are unperturbed and looking forward to welcoming the 2,381 athletes who have signed up.
No homecoming: For Fiona, an ewe, the path to rehabilitation is looking bumpy. Found stranded for over two years in the Scottish Highlands, Fiona has been dubbed 'Britain's loneliest sheep' during her highly-publicised rescue mission. While her recovery is complete, her relocation to a farm park is contested by Animal Rising, an animal rights group. They argue that this move might harm her health and lead to her exploitation for fame and spectacle. As a result, Fiona has been temporarily relocated to an undisclosed location until the dispute over her future home is resolved.
Older messages
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