Ladies and gentlemen, a very good evening, and welcome to Zomato Limited's Q3 FY 2023 earnings conference call. From Zomato's management team, we have with us today Mr. Deepinder Goyal, Founder and Chief Executive Officer, Mr. Akshant Goyal, Chief Financial Officer, Mr. Albinder Singh Dhindsa, Founder and CEO of Blinkit, and Mr. Kunal Swarup, Head of Corporate Development. Before we begin, a few quick announcements for the attendees. Anything said on this call which reflects outlook for the future or which could be construed as a forward-looking statement, may involve risks and uncertainties. Such statements or comments are not guarantees of future performance, and actual results may differ from those statements. Additionally, please note that this earnings call is scheduled for a duration of 45 minutes, and we will be starting directly with the Q&A section of the call.
If you wish to ask a question, please use the raise hand feature available on your Zoom dashboard. We will announce your name on the call and unmute your line, post which you can proceed with your question. We will wait for a minute while the question queue assembles. The first question is from the line of Mr. Ankur Rudra from JP Morgan. Please go ahead.
Hey, thank you. The first question is, you know, you mentioned several drivers of the growth slowdown in your prepared remarks in the Q&A. I was curious if there was any loss of market share, particularly with your most frequent customers that also contributed to this.
Hi, Ankur. Thanks for your question. Akshant this side. Look, I think, for us it's very, very hard to measure market share on an ongoing basis, you know, because we compete with multiple players and most of them are, at least some of them are unlisted. There was nothing that pointed to a significant share loss to us as far as we know, right. I think, majority of the slowdown I would attribute to the general macro, industry-wide macro, than anything else.
Okay. In terms of you mentioned that for example, the growth has remained weak in Jan, but you've been able to get profitability in the month. Could you maybe highlight what was the lever of profitability if it wasn't for, you know, if there was no growth?
Yeah, two elements there. I mean, Ankur, eventually the absolute profit is a function of growth in the business and your margin expansion. As you would have also seen in the December quarter results, our contribution margins in the business have expanded compared to the September quarters. I think that sort of margin expansion is enough right now to for us to sort of get to breakeven in the month of January. Once growth comes back, that will only accelerate the absolute profits from the business, you know, which should help us get there faster and over time, you know, generate profits in the business.
I mean, maybe I can, you know, take this forward. There's a concern among investors that is there any kind of trade-off between growth and profitability here. Can growth and profitability happen at the same time?
Yeah, I mean, there is always a trade-off, uh, uh, of some-- there is always some kind of trade-off, right? I mean, eventually, uh, you can spend more, uh, you make delivery fee free for every customers, of course you will get growth, but that's not the kind of growth we want, right? So in, in an environment where there is macro slowdown and the industry is not growing, we think we've grown faster than the industry overall, the restaurant food industry in that quarter, right? So, so to that extent, uh, uh, I don't think, uh, we are trading good quality growth for margins at this point.
Okay. Sorry, the last question on Zomato Gold. Is this a course correction and an acceptance that you, perhaps shutting down Pro Plus was not right while your competitors still had a very aggressive program?
This is a very different program from Zomato Pro. Right? Zomato Pro essentially had a free delivery as a feature and which applied to all orders. Zomato Gold has multiple other benefits in addition to that, and the free delivery is on only certain orders. I mean, even before Zomato Pro Plus, we had a Zomato Pro program, and like two, three years ago we had Zomato Gold. There's a lot of learnings that we had in terms of what worked, what did not work for customers, for our P&L, for restaurants. What we wanted to do essentially was to take a step back and put all of this together into a program which we think can now last going forward, right?
One of the main key highlights of the program this time is on time guarantee, right? Which is a very unique thing in the market right now. Developing that also took some time. I don't think of this as a call that we took, which we sort of now correcting. I think this was the natural path of moving forward in terms of developing a very robust membership program.
Okay, just as a follow-up to this only, is this gonna be extended to Blinkit?
We don't wanna comment on that, Ankur. So far we have kept it restricted to the food business. I mean, this is a business call we will take down the line if we think it makes sense.
Okay. Thank you.
You're welcome.
Thank you. Next question is from the line of Mr. Sachin Salgaonkar from Bank of America. Please go ahead.
Hi. Thank you for the opportunity. I have three questions. First question, Akshant , just wanted to understand if you could, you know, give a little bit more clarity on the mix of GOV, you know, did in this quarter we see a stable AOV and the order frequency was lower or, you know, any data point you could provide? You know, going ahead, how should we look at the drivers, which is, you know, the incremental GOV would be driven more by increase in order frequency or it's still AOV which, you know, will continue to increase?
Thanks, Sachin. If you look at the data that we had shared on a year-on-year basis, the 21% GOV growth year-on-year was an outcome of 14% growth year-on-year on orders and about 6% growth year-on-year on average order value. Specifically Q-on-Q, the order volume declined and that was because of slightly lower monthly transacting users and slightly lower ordering frequency in the quarter, right? You know, we attribute that to the general slowdown that I just spoke about as a response to the previous question. Going forward, I think, I mean, as we now seeing the recovery coming in the business already, we are seeing more customers coming back.
We expect to continue growing both on MTUs and frequency going forward and the combination of growth across these two should drive the order value, order volume up going forward. As far as average order values are concerned, I mean, for a large part these are I mean, this is an outcome metric of the context and the environment, right? We've seen, a decent bit of AOV growth, in the last three, four quarters. Part of it is driven by inflation, which has led to the restaurants increasing their menu prices, which we've also seen, with a number of listed QSR players, in the recent past.
Another part of it is essentially driven by the product improving and the recommendations on the platform, improving supply side, getting more premium because a lot of more fine dining restaurants coming on the platform for delivery and so on. I think some of these factors will continue to play, now, you know, on balance, whether the order values continue to go up or they come down slightly, I think it's hard to predict. I would say that majority of the growth in long term should come from order volume growth, which in turn would be driven by more customers ordering and more frequently.
Thank you. Very clear. Second question is on the take rate. It appears to have been now stabilized. Just wanted to understand, is it the new normal or we see room for it to further improve?
Yeah. I'm assuming you're referring to take rate as a combination of the commission revenue, ads revenue, and the customer delivery charges, right?
Correct.
I think as an aggregate, we think, there is still room to grow here. We are at about close to 23.8% or 24% take rate ballpark right now in the last quarter. From here on, I think, this will go up despite the delivery charges perhaps continuing to come down slightly because of Zomato Gold gaining scale. Majority of the growth here could come from restaurants spending more on growth on our platform in form of advertisements and some sort of continued correction on take rates that we continue to do and then which we've spoken about in the last couple of quarters.
Thank you. Very clear. Last question is, you know, just wanted to have a little bit more clarity on consumption slowdown. And the reason is, you know, there are certain mixed signals coming from QSRs, right? Certain QSRs are seeing slowdown, others are not. Question to you is there any particular segment and, you know, I read your, you know, obviously reports where you indicated, you know, which all segments were, you know, are you seeing a bit of impact? Any more clarity you could give in terms of any particular segment, any particular geography which is seeing a bit of a slowdown, or do you see that being more across the board?
I think at least as far as our data is concerned, we think it's across the board. It's hard to we can't single out any particular cuisine or geography at this point. Having said that, I think, you know, given we, you know, our platform works with like thousands of restaurants, there will be restaurants which grow more than others because they spend more on marketing and investments. I think some of the restaurant, individual, restaurant growth is also coming from them opening more new outlets in the quarter as compared to the others, right?
You know, I agree with you that, you know, there is sort of some mixed signals there, but I don't think, at least from what we've observed, we are not able to, I mean, we don't think there is any slowdown in any particular pocket of either a cuisine or geography.
All right. Thank you and all the best.
Thank you, Sachin.
Thank you. Next question is from the line of Mr. Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi, am I audible?
Gaurav. Hi. Go ahead.
Yeah. I have three questions. The first is on the frequency. If I look at the high-frequency users as a % of total annual transacting users, that has actually gone up, which would actually help frequency at the company level. Which cohort of customers, which basket of customers you are not seeing a major increase in frequency or where there is a key roadblock, and what are the initiatives that you're taking to kind of, you know, change that?
Hi, Gaurav. This is Kunal here. You rightly pointed out that the power user or power customer cohort is sort of has gained, next to that, we've also talked about the increase in annual transacting users. If you see that number is also pretty healthy, 23 million new users added. We've also mentioned that, for the last quarter, as well, that new user addition has been healthy. When you put this in context of the overall numbers, obviously, we've mentioned in the past as well that new users, when they start
Transacting on our platform, the ordering frequency is lower. Therefore, the aggregate would sort of remain flattish. As long as our new user addition continues to be quite strong and healthy, the aggregates will not present the right picture. We've presented the power user cohorts as well for you to understand how the health of the business is improving.
Gaurav, just to add here, I think, if your question was specific to the last quarter, even these power users, their frequency went down in that quarter, right? The data here in this chart is on an annual basis, where we see the ratio of power users and the frequency going up. For the last quarter, the frequency drop was across the board. In fact, I would say it was more pronounced in the slightly higher frequency customers than in the others.
Got it. The second question is that it looks like you have load bagged some part of your operating profits in the form of indirect cost, because that has grown like 14%-15% on a YoY versus a very muted trend in the first half of the fiscal year. What are these investments that you're making and how are they gonna yield results and, you know, kind of, reflect in a better profitability overall?
Gaurav, part of this is also seasonal because if you look at the expenses below contribution, they are a combination of both, marketing expenses as well as corporate overheads, which include, server and tech and other costs. So given that this is a festive season quarter, typically there is some incremental spend on marketing and branding. And in terms of our server and tech costs, there are also some sort of annual renewals that kick in. So even if you look at the same quarter last year, there was a bit of a jump in that quarter. If you look at the average for the last three quarters, that would be in the range of 1%-2% growth.
On an annual basis, if you look at these numbers, that would be more in the range of 12%-14% kind of growth, right? Therefore, I think it's not meaningful when you look at it from an annual perspective. Hope this answers your question.
Got it. Yeah, sure. Thanks. Last question. Any color on Everyday, Zomato Everyday, is it gonna be a cloud kitchen? What form and what factor? I'm just trying to understand, is it going to be asset heavy, kind of a investment in the form of, you opening kitchens, to cater to the home-cooked food?
Yeah. Gaurav, it's not going to be very asset heavy, but we will have to open finishing stations to be able to service this food to customers. We are currently planning to experiment with the infrastructure that we had anyways built for Zomato Instant. We're using the same finishing stations to roll this out in the next few weeks in Gurgaon and Bangalore. These are the two cities where we had Zomato Instant. Depending on the off-take and what we learn from there, you know, we'll sort of decide on how to expand going forward from there. It's not, it's, I mean, compared to Zomato Instant, it's only gonna be less capital intensive than what Instant was.
Got it. Thanks. That's very helpful.
Thank you, Gaurav.
Thank you. Next question is from the line of Mr. Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good evening, team. A few questions. My first question is, while you have mentioned about the slowdown, but the press release also talks about green shoots in January. Can you just elaborate on that?
What is your question, Vivek? Can you be specific?
No, I'm saying that the fact that, you know, while we are talking about slowdown, you have also mentioned that you are witnessing green shoots, right, in January. Can you just comment on that? Has there been, you know, any specific, let's say, customer cohorts which have done better? Is it like you are seeing, you know, a pickup in exit January, which is what we should, you know, look at in the fourth quarter? Can you just elaborate on that comment, Akshant?
Yeah, Vivek. I think what we meant there was that last, I think a couple of weeks, we've been seeing the app opens in our business go up, you know, which sort of I mean, which is after a sort of a period of time, over the last two, three months when we haven't seen that. That is telling us that perhaps the slowdown has bottomed out, and that's sort of our conjecture at this point. We'll need to see how it unfolds in the rest of the quarter, the demand patterns, whether they change meaningfully or not. A part of this growth could also be attributed to us launching Zomato Gold, right? There is that attribution also.
I think still early days, but I think, whatever signals that we are able to see, it seems like, it's only gonna get better from here from a demand standpoint.
Okay. Got it. The other question, Akshant, is what Ankur asked at the beginning, and you responded, you know, growth versus profitability. Let's say you are at over 5% on contribution margins right now. As we go forward, your guidance still is a breakeven by fourth quarter or latest by September quarter, right? Based on, you know, based on the current contribution margins, and let's say these move up, does that change the trajectory of growth? Let's put it this way, what is your expectation if you keep seeing profitability, better profitability? What is the level of growth that you see in the business if macro were to be more conducive?
Vivek, we are not holding back on growth investment at this point, right, to increase margins. I think that is what we've been reiterating, for the last two, three quarters also, right? So we are not making that trade-off between a good quality growth, which we'll sustain and compound, for short-term increasing margins. I think the lack of growth right now, as we have spoken multiple times, is because of the context and industry slowdown. How quickly that changes and in what shape and form the growth comes back in the next one quarter, two quarter, I think is very hard for us to comment.
Long term, you know, if you take a four or five-year view, as we mentioned, that we remain bullish on this space and the market is still under-penetrated, and there's a long way to go. I think we should see healthy compounding over a five-year period in the business. But short term is relatively harder to predict at this point.
Okay. A follow-up to that, Akshant. When you say that you are not, you know, pulling back on investment, from a margin standpoint, does that mean if I take... you know, forget about the next few quarters, but let's say if we take a three, five-year view, does that mean your margins will also have a cyclicality and extreme cyclicality, let's say contribution margin ranging from, whatever, let's say 2%-7%? We will see some, you know, stability in contribution margin and if the macro is conducive, you can still get to, let's say, 25%-30% kind of a YoY growth. How do you think about this on an, you know, the margin cyclicality is something that I'm unable to, you know, fully appreciate.
Vivek, I don't think that we are going to have that large of a standard deviation in the margins in our business, right. While it can go up and down over a period of four or five years, but I think it's largely going to be range bound in a narrow range. And that might change because of some additional investments we want to make at some point in time in future, or we see opportunities of new growth expanding into newer cities and so on, right. Like to like in the same city where we are already present today, I don't think there is going to be massive swings in margin going forward.
Sure. My last question is on Blinkit. you know, with the tough macro, and I know you are a very early stage, you know, in that, any headwind that you are seeing on the, on that business, particularly on the demand side, at least in the existing, in the, I wouldn't say mature geo- you know, locations, but any pullback in the consumer demand or any down trading that you are seeing in the, you know, in the markets where you forayed early?
Hi, Vivek, this is Albi, I'll take this. Yeah, so far, like we mentioned in the letter, we are seeing good user growth. We are seeing our order frequencies are healthy. We are also seeing new user growth being at a very healthy level continuing forward. We saw about 3% dip in our average ticket size. Part of that, we are able to attribute to consumers buying smaller packs, which could be a indicator that maybe, you know, consumers are gonna consume less during this period. However, you know, that is a strong might, it also might be consumer behavior, the kind of customers that we're acquiring at this point of time. We're not able to exactly attribute that to a macro slowdown.
In terms of the other customer operating metrics, we are not seeing any slowdown, and that's probably part of the fact that, one, we are already fairly under-penetrated in the cities that even we are already large in. At the same time, our city spread, especially compared to, for example, the Zomato business is very, very small. 90% of our stores are only in the top seven cities. I think, we would not be sort of, at this point of time, be able to, you know, be the predictor of whether macro trends are affecting the segment.
Okay, got it. Albi, another question, which will be my last one. You know what Akshant mentioned about, let's say, food delivery business profit versus growth. What is your sense on a Blinkit business, given that it's early stage? Your numbers are obviously speaking for itself. What is your thought process between growth and profitability at this stage?
Vivek, I think we will let the numbers speak, and they're basically showing that our business has a high amount of operating leverage. For the last two quarters, the business has grown significantly while, you know, moving steadily towards profitability. I think we will continue to see this trend. Our immediate, obviously, focus is to be a contribution positive business. We are at about -4.5% right now. I think, if you sort of also take a view of the kind of investments that we need to make into the business in order for supply creation, look, we take a very sensible approach to it. We look at it that we don't want to get too ahead of our management bandwidth.
We don't want to get too ahead of the kind of infrastructure investments that we need to make judiciously while improving the supply side of our business. That's a major investment going forward that we foresee. The growth investments in our business, at least at this point of time, are not something that we are really worried about. I think we are spending more of our time on the supply side of the investment and what would be a right time for us to sort of start making them.
Got it. Got it. Quite interesting. Wishing you all the very best. Thank you.
Thank you, Vivek.
Thank you. Next question is from the line of Mr. Vijit Jain from Citigroup. Please go ahead.
Yeah, thank you for the opportunity. Hi, Akshant, I have a couple of questions on those annual unique transacted customer data points that you shared. If I look at 2022 versus 2021, just looking at the previous year's customers, there looks like the churn rate went from about 10% in 2021 to about 30% in 2022. Do you think this is attributable to the rollback of Gold? Related question to that, all these end of quarter trends that we see in MTU decline and frequency decline, is this mostly to do with the fact that some of those people who were rolling out of Zomato Pro Plus, their frequency reduced primarily and therefore it'll come back? That is my first question.
Yeah. Hi, Vijit. Yeah, I think the absence of having a membership program definitely did have.
I mean, definitely it did impact us in the last quarter. So we, I think we're recovering from that now, and to some extent, that has played a role in some customers that writing and lower frequency that we saw in the last quarter. Generally, on the annual trends, I think our retention is fairly healthy. I'm not sure how did you come up with the math of 32% retention, but...
Basically, I just looked at 2020 customers, in 2021, if you remove the new customers from that number and compare with the previous year. Just a simple math on that. It looks like, yeah, you lost 15 million of the customers you might have had in 2021, in 2022, then you added another 2023. Something like that. I think that's what I did.
Yeah. No, I think a large portion of our customer base is very infrequent.
Alright.
Like, which orders, less than four times a year, right? You know, every year a lot of these customers keep coming back to our platform.
Mm-hmm
S o the, you know, absolute, loss of customers, on our platform if you look at, like, annual, cumulative annual retention is very acceptable and I think, low compared to what we've seen with other businesses globally. We're not worried about retention here. I think, largely everything is on track as far as, the, you know, retention and user acquisition is concerned.
All right, thanks. My second question, just staying on Gold is in the current quarter, obviously as you invest in Gold there are some introductory prices offered there. What kind of levers do you think from the cost side offset that? I did see you mentioned you're shutting down 250 of the smallest of cities. Is there material cost savings there? If you can overall give a sense of, you know, the how you look at the Gold program in its entirety from, you know, on a P&L perspective, that'll be great. If it is related to that, my last question is when you say you're not holding back on growth investments, what are you talking about? Are you talking primarily about Gold when you talk about growth investments in the food delivery business?
So it's multiple things. Yeah, Gold of course will definitely help drive long-term growth in both frequency and retention. We are also continuing to invest in acquiring new users. As we mentioned that the pace of new user addition remains healthy, you know, so which means we're not cutting down on our marketing and new user acquisition spends. All of that continues and, you know, I mean, the second question, you know, on specifics of Gold at this point, we would not want to comment on how it evolves and how we think it'll shape up. I mean, those are some things which will evolve with time and as we get more data and things sort of we want to right now not share much about.
Generally speaking, I think the impact of Gold on our economics we think will get offset with the progress we make, not just on the cost side, but on the revenue side in the business going forward.
Mm-hmm. Right. Sorry, just the first part of my question, Akshant, the shutdown of those 250 very small cities, I know the GOV impact is minuscule, is there material cost savings there from, you know, just being present in those cities?
Not very material, Vijit.
Yeah. All right. Thanks, Akshant. Those were my questions.
Thanks, V ijit .
Sorry, one last question if I can. Just if you can give an update on, you know, the overhaul of the dining out business. If I just look cursorily at your, you know, non-food, non-Blinkit business on a QoQ basis appears to have improved. Is this mostly Hyperpure?
Yeah. which is I think Hyperpure numbers are disclosed separately.
Yeah.
You know, if you look at, I mean, for as far as other is concerned, we have given some color of what led to that sharp growth in the QoQ revenue in question number 13, I think.
Okay. I'll just check that. Just if you can give an update on dining out overall maybe, yeah.
Question number 11. Yeah.
Okay.
Yeah. Here partly, you know, one, there was contribution from our, you know, the services that we offered to Talabat in the UAE and, our offline events, Zomaland, et cetera, which came back after-
Yes
you know, a hiatus.
Mm-hmm.
That was partly the reason why there was an increase that you saw.
Right.
It's not so much due to the monetization of the dining out business, where we are still in build-out mode like we've mentioned.
Okay. Got it. Thanks.
Thank you. Next question is from the line of Mr. Manish Adukia from Goldman Sachs. Please go ahead.
Yes. Hi. Thank you so much for taking my questions. My first question is on just the growth drivers. In the shareholder letter, you talked about three factors or drivers that you think could help revive growth in the food delivery business. Do you see all of those three drivers as equally important, or do you think one is, let's say, more important than the others? If you can just, you know, maybe help us give, provide some more color. A related question to that is on the annual transacting users that you disclosed for 2022, which is about 58 million, and currently you have about 17 odd million of MTUs. What does it take over a longer term, let's say two, three-year period, to convert a large number of these annual transacting users into MTUs?
That would be my first question.
Yeah. Manish, answer to your second question is actually, also a response to the first question. All of these initiatives that we mentioned, I think they'll drive higher frequency of ordering from our existing active customers who are very infrequent today, which will mean that more of our customer base will start ordering every month.
Mm-hmm.
Hence a large portion of our ATU will start converting into MTU. Within those two, three things that we mentioned, I think our Zomato goal, of course, is gonna be important as a retention and frequency driver in the long run. Zomato Everyday, which is essentially an offering where our customers will be able to order home-style cooked meals at affordable prices, I think would be a big lever as well, if we are able to execute that well and sustainably. That is something which we are very excited about and we'll have some early results perhaps to talk about in the next quarter on how this is going.
Yeah, I think all of these things are important, and continuously fixing, you know, essentially the UX of our app, curating better collections of restaurants for our customers, and making our systems more reliable. I think all of that will lead to compounding growth over the next few years and all these initiatives should help us drive MTU growth going forward.
Sure. Thank you for that. My second question is on Blinkit. You mentioned that, you know, Blinkit can potentially also be profitable at AOVs of about 20% lower. Just wanted to understand, are you actually expecting AOVs to decline by that magnitude over time? If it does, what would be the offset for profitability in that case? A related question, Akshant, last year, when you'd announced a transaction with Blinkit, you'd mentioned, and I know you said specifically it was not a guidance, but you'd said that, in the next three years or less than three years, Blinkit can potentially be profitable. Given what you've seen in terms of track record of the business where losses have been narrowing consistently, do you think there's potentially upside risk to that number? Meaning can that profitability actually be sooner?
I'll let Albi take the first one. I'll respond to the second question, Manish. So far, I think the business has done better than what we expected, both in terms of top line growth as well as progression in e-economics. Right. I think I'm not either guiding to anything different than what is what we said earlier. I think the next two, three year is the horizon which we should stick with for this business getting to profitability. If the progress continues at the pace at which at what we've seen in the last three quarters, perhaps we'll get there sooner, right? We'll have to sort of wait and watch on that.
Hi, Manish, this is Albi. I'll take the first part of the question around AOV. One of the drivers of AOV, you know, drop that we are at least seeing is as we are also getting bigger and expanding our business, the kind of products that sellers are putting up for sale on the platform is also evolving. The number of use cases that we can potentially cater to the customers that eventually help the platform increase our wallet share, those are going up. That causes variability in the average ticket size. As we introduce new use cases, which we did, for example, introducing fresh sweets during Diwali, introducing a lot of, you know, SKUs around diya or cakes around Christmas and Christmas decorations.
A lot of these individual events, as well as the general choice available to the customers on the platform, that evolves. Some of these choices when consumers make to buy certain products, they can be lower average ticket size as well. Some of them obviously are higher than the average grocery basket ticket size. What you're seeing and what we see, is essentially the evolution of the business that as it gets bigger, there is still a little bit of uncertainty. We are confident on the on our ability to be able to break even at lower average ticket sizes because some of these use cases as they come up, are also potentially high commission categories for us.
So not necessarily do they lead to revenue impact, which is something that you are seeing in our quarterly results as well, that even though there was a drop in the average ticket size, the overall revenue and the commission percentage that we are able to generate from that has gone up. I think, you know, that gives us the confidence that, you know, the business will evolve in its average order size as it expands beyond grocery. But at the same time, we should be able to make the economics of the business work, and that is what Akshant was referring to in that answer.
Thank you, Albi, for that. Just a quick follow-up there. In the quick commerce business, there are quite a number of players which are operating.
Given the macro environment that we are in, have you seen any slowdown in competitive intensity environment? Let's say, hypothetically, if in the next six, 12, 18 months, there happens to be any kind of consolidation in this industry, do you think there's any merit in Zomato, let's say, acquiring somebody out there, let's say like you did in the case of food delivery with the case of, Uber?
Look, as of now, we're not seeing either a drop in the competitive intensity in quick commerce. I think most of the players that are in the segment are trying to grow their businesses as well. I think if there are, you know, any opportunities in the future, we'll evaluate them on merit. As of now, I think we are happy with the way we are building our business, and we would like to continue on this journey, and keep working on the basics of, you know, fixing our business and also delivering great experience to the customers. I don't think we are going anywhere beyond that.
Thank you, Albi and Akshant, for taking my questions. All the best.
Thank you. Thank you. Next question is from the line of Mr. Swapnil Potdukhe from JM Financial. Please go ahead.
Hey. Hi, thanks for the opportunity. I have two or three questions. First of all a modeling related question. Like how will the Gold program subscription revenue be recognized going ahead? Will some of the revenue be ascribed to food delivery vertical, and will it be considered while calculating contribution margins?
Yes, Swapnil, that's right.
Okay. The second question is with respect to Blinkit. I see that your dark store count seems to have come down by around 10% versus a couple of quarters back. What is the thought process here? Have you closed down some operations in a few cities? Because in the shareholder letter you have also mentioned that addition of 30%-40% stores additions in the next year. What is the strategy over here?
Hi, Swapnil, this is Albi. What you will see is the store count should start inching upwards from where we are in this quarter. Primary reason for the change in the store count was a lot of our leases expired in the O&D quarter because we had only signed short-term leases till we had conviction on particular geographies. Some of those stores are in the process of being moved into other different locations or, you know, we are putting in more stores because the demand is higher. What you will see is that we will be adding more stores going forward at a reasonable pace. We have not pulled out of any geographies.
We have not pulled out of any cities and the plan is for us to soon. We have identified high potential cities. Some of our smaller cities that we opened up in the last quarter have given us really good results as well. What we are hoping is, we will be able to expand more and more into more and more beyond the top 10 cities, where we had put a lot of our initial focus on. Even expand our footprint within the cities that we're operational. Just to give you an example, like, we only serve about 40% of the geographical area of Mumbai.
We would like to increase our footprint over there as that market is somewhere we are growing and it's potentially becoming a key market for us.
Right. Thanks, Albi. Just one more question on the food delivery side. I would like to understand the cohort GMV moment. Have you seen a slowdown of GMV growth in only those cohorts that were acquired during COVID, especially in, let's say in FY 2021 or 2022? Or there has been a slowdown across pre-COVID cohorts as well?
Hi, Swapnil. Look, I think the slowdown has been across cohorts. I don't think we can single out only the COVID-related cohort because like Akshant pointed out, it's a broader sort of industry-wide macro slowdown. There are some trends that we're seeing, for example, in the more higher-end premium customers, it's some share shift from online to offline, some loss of orders due to premium travel on the sort of mid-income side, more driven by macros. These are some of the trends that we saw and which is what we put out in our letter. Outside of that, I don't think there is anything very noticeable.
Right. Just one last question, if I can squeeze in. In the Gold program we have offered some discounts on certain restaurants. Just wanted to understand now who will be bearing the discounts. Will it be the restaurants or Zomato is also taking some burden over here?
These are all restaurant-funded discounts, Swapnil.
Got it. Thanks, thanks Akshant. Thanks, Albi.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time, we will now take the last one to two questions. The next question is from the line of Mr. Aditya Suresh from Macquarie. Please go ahead.
Hi. Thank you for taking the questions. Akshant, maybe for you, right? We had Zomaland in this quarter, brand marketing spends kind of went up. What are some of the metrics you're looking at to judge the efficiency of the spending versus, for example, some of the more direct levers like, say, increasing platform discounts?
Yeah. I think like there is platform discounts, there is digital marketing, there is broader mass media marketing, and then we also market through some of the events that you mentioned, right? I think ROIs for each of these channels of marketing have to be calculated differently and looked at differently because some of them have smaller feedback loops, some of them have slightly longer feedback loops. I think just like any other business, we continuously continue to evaluate the channels which are working well for us, and sort of slightly more index our marketing spends to those channels versus others. Some of these things are also seasonal, right? So some kind of brand marketing works in a particular quarter versus others.
Now that we have a four, five-year history behind us, I think we're getting better at this every year going forward.
Okay. I appreciate that the conditions are dynamic and there are multiple levers that you're kind of solving for at all times, right? If I just had to tactically ask you over the next, say, six, 12 months, what are the top three KPIs that you are managing for?
I mean, there are a bunch of things that I think eventually everything is about growth and profitability, right? These are the two metrics in addition to, you know, customer NPS or stakeholder NPS. I think if you were to ask me for three metrics, I would say overall growth of the business, overall profitability. The stakeholder NPS in our ecosystem, I think those are the things we really care about.
If I could, at one level below that, Akshant , what would be the steps which you're kind of prioritizing towards, whether it be, for example, any of the contribution margin levers or the growth levers of products? Any specific measures you want to speak about?
I think these are all, you know, business discussions, Aditya. I don't want to share how we think about our business and strategy on this call, right? I don't wanna be that specific. I hope that's okay.
Thank you.
Thank you. Next question is from the line of Mr. Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Thank you for taking my questions. You know, Akshant , just, I know it's still fairly early, but any initial reaction on, you know, the Gold, you know, impact on business? Are you seeing any increased ordering from the power users? Also, you know, given that the threshold for free delivery on Gold is INR 199, which is, you know, practically half of your AOV, is it fair to assume that, you know, there will be a bit of a drag on AOV because of Gold scaling up?
Mukul, I think on the overall impact of Gold, I think it is very early right now. We are barely two weeks into it. I think the only thing that we wanted to share at this point, which we have shared in our letter, is that we are now close to 900,000 members, you know, which means that the program is scaling rapidly. How it is impacting our economics and frequency, I think, I would say it's a little early to talk about that. On your second question, I mean, it works both ways, right? Having a, you know, AOV baseline of INR 199 also helps move some lower AOV orders to higher AOV.
On balance, I would not conclude that the order value will come down because of it might also go up. We'll see evidence of that as we go along. Right now it's very early in the journey to be talking about any specific things.
Sure. Secondly on, you know, if I take a slightly longer term, you know, performance in the food delivery space over the last four to five quarters, you know, your YoY growth has been coming off and, you know, right now you are, you know, growing at the same pace at which broader QSR space has grown in Q3. How should we see the long-term, you know, growth perspective of Zomato? Is it still fair to, you know, continue to assume that, you know, the growth will be meaningful because of the early stage of the food delivery industry in terms of adoption?
Should we now start seeing some convergence with the broader food industry, you know, given the large revenue base as well as the infeasibility of, you know, scaling up in smaller cities?
Hi, Mukul. This is Kunal here. I'll take this. I think we've also adequately answered this in the SHL. I think, obviously the year-over-year growth has come off a little bit because of the last quarter and the quarter before that being slower growth quarters. Like we've also pointed out, I think from a overall new user addition on an annual basis, I think it's been pretty healthy. is our sort of power customer cohort. I think these are fairly good indicators that, overall, I think, you know, we are heading in the right direction. There may be, you know, a couple of quarters of ups and downs that we see and largely linked to macro events. We don't see anything structurally concerning at this point in time.
Fair enough. The last one was for Deepinder. Deepinder, thanks for providing a perspective on leadership in the letter. I just wanted to clarify, have the key leadership roles been assigned, you know, to other members of the team? Or have they been consolidated with the current leadership for the time being?
Mukul, hi. This is actually a mix of both here. I am also doing a bunch of things. Akshant has also taken a couple of things up. We also have a strong bench. With the combination of all these three things, we are good for now.
Sorry. Yeah, so just to take this forward, how do you see this, you know, play out over the longer term? I know, you know, you have addressed the unusually high volatility in leadership. Given, you know, the bandwidth and the multiple roles which you are juggling at the moment, you know, are you expecting to retain whatever you have taken additionally? Will this, you know, will be kind of given to suitable candidates as, you know, you see them come up?
So far we can fit it into the 12 to, like, 14 hours a day. It's, like, perfectly fine. We're always constantly on the lookout for talent. Mix and match again.
Got it. Thanks for taking my question. That's all from my side.
Thank you, Mukul.
Thank you. Ladies and gentlemen, we will now conclude this conference call. Thank you for joining in. You may now disconnect your lines.