How Swiggy works: business model of India’s largest food delivery company
“I am in no mood to eat home-made food today.” Go Swiggy
“Mom is in no mood to cook today.” Go Swiggy
“I need something fun to eat.” Go Swiggy
I always wonder how easy has it become?
Previously, we had to get up and reach the restaurant to fill our food cravings. But getting to the restaurant was sometimes a big deal as we have some other tasks to finish or we just can’t get set, ready, and go. Swiggy broke all those barriers and availed our favorite food right at our doorstep. Now, we need to grab our smartphone, turn on Swiggy app, and order. As easy as sipping tea.
You do know that Swiggy is simply an online food ordering and delivery platform. But are you aware of the story behind this super simple idea turning into India’s largest and most valuable online food ordering system?
Today, we will take a tour on inspiring Swiggy’s story.
Swiggy started in August 2014 as an online food ordering and delivery startup. Today, it has over 5,000,000 mobile app installations and is a common household name for anyone who wants to order food online.
Throughout its online food delivery journey, Swiggy tied up with 25,000+ restaurants and hired its fleet of local delivery boys, undertaking more than 13 cities in India including Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, etc. Their success may look overnight, but similar to all great ideas of the world, Swiggy wasn’t born out of the blue. Instead, it was a journey of co-founders that took them to Swiggy after several trials and errors.
Born of Swiggy
“Two roads diverged in a wood, and I took the one less travelled by,
And that has made all the difference.”
Rise and fall of bundl
Sriharsha (Harsha) Majety, founder and CEO of Swiggy, saw his first opportunity in unorganized logistics and shipping sector of the e-commerce industry. He discussed ideas with Nathan Reddy (Co-founder, Swiggy), and both of them were inspired by the success of Amazon, Flipkart, and others.
One thing they were sure of is:
“A business must be a mixture of technology + offline jobs.”
From there, they started their first venture in August 2013, Bundl – the fastest and easiest way to ship products.
But things didn’t go as expected. The first reason was that they were devoid of a technology-focused team. And the second was Flipkart’s and Ebay’s decision to ship products on their own resulted in slimming opportunities.
Within a year, Harsha and Nathan shut down the Bundl.
Learning from experience
With Bundl experience, they realized the pathetic condition of logistics in leveraging technology for the sake of business. Instead of putting a stop, they started looking for something that can be achieved with a click of a button. At the same time, their small team completed when they met a technological geek, a former Myntra software engineer, an IITian, Rahul Jamini.
Motivated by the success of Ola and Uber, the three partners saw massive potential in hyperlocal delivery and put all their skills on the table. That’s how Swiggy came in existence in August 2014.
It wasn’t the end, rather a beginning.
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A late entrant
With Zomato and Foodpand’s existent and limited success, experts predicted that Swiggy is entering the overcrowded market. UberEats was also on its way to make the mark. The competition was high with brands like Uber and Zomato already in the ring.
But what separates success from failure is perseverance, resilience, and growth.
Swiggy is nourished with all these qualities.
Platform expansion challenge
The first challenge for Swiggy was to convince restaurants to join the platforms against the competitors. That needed a competitive advantage.
Swiggy’s commitment and investment towards a faster, easier, and proper logistics network with a wide range of local delivery boys keep it apart from others. Additionally, the idea of connecting local restaurants with local customers to avoid too much waiting for food was the icing on the cake.
At that time, Zomato was not interested in expanding its platform – another advantage.
Soon, Swiggy began expanding its platform with restaurants and delivery boys.
Swiggy started gaining the attraction of big investors because of its skyrocketing growth and revenue.
By 2015, Swiggy raised $80 million funding in Series E round escorted by Naspers. Other Venture Capitals, along with Norwest and existing Swiggy investors, increased the funding to a great extent.
After that, there was no going back.
Swiggy stats and facts: funding and major achievements
Sriharsha Majety and Nathan Reddy Founded Bundl – a company connecting courier companies across India.
Bundl Shut Down
Sriharsha, Nathan, and Rahul Jaimini founded Swiggy to connect foodies with local restaurants
Started with six delivery executives and 25 restaurants in Koramangala, Banglore
Partnered with 100+ restaurants, delivering over 70,000 orders per month.
Received its first significant funding of $2 million from a prominent investor named Accel and SAIF partners
Raised $16.5 million in Series B funding by Norwest Venture Partners (NVP)
Raised $35 million in Series C funding from New York-based investors Harmony Partners and Singapore-based RB investments
Swiggy faced 65 times losses by the March-end
Swiggy got down to work on cutting costs and strengthening logistics network
Partnered with third-party logistics players to build a sustainable network.
Swiiggy invested in core engineering, automation, data sciences, machine learning, and personalization to understand customers’ need of the hour.
Raised $80 million, one of its most significant fundraisings in Series E by South African Internet and media conglomerate Naspers
By December 2017:
Swiggy reached 10+ cities, tied-up with over 20,000 restaurants, and accounted for 4+ million transactions per month
Swiggy acquired Scootsy to diversify its business in categories other than food like groceries, fashion items, stationery, etc.
Swiggy clocks around 1.4 million orders per day, connected with 45000 agents, partnered with 1,30,000 + restaurants and has a presence in 325+ cities of India
How Swiggy works?
Swiggy is an online platform, popularly known for its mobile app, to order food from a wide range of neighbourhood restaurants. Because of offering quick doorstep food services in the minimum time possible, Swiggy has become a prior choice of foodies. If you have a similar business idea where you can mix technology with humans to offer a one-click solution, you must know how Swiggy works and earns revenue:
Swiggy app working model in eight simple steps
- Users sign up for Swiggy mobile app and become customers
- Customers open the app, select the restaurant, and order the food
- The app confirms the delivery location
- The restaurant receives the order and confirms it
- Local delivery boy confirms the pick-up and drop location of the order
- Customers receive the notification showcasing the confirmation of the order and the person who will deliver the order
- Customers track the entire journey from mobile app starting from the order confirmation to the moment order gets delivered. They can also track the delivery boy’s location.
- Swiggy marks your ordered completed, once delivered
After the order completion, Swiggy app asks customer’s reviews and ratings on food, taste, and delivery service.
What Is The Business Model Of Swiggy?
Swiggy business model is based on the hyperlocal on-demand food delivery business operation, intending to deliver food within 30 minutes. Swiggy bridged the gap between food lovers and restaurants by utilizing cutting-edge technology and idea.
Let’s look at how Swiggy business model works now:
1. Customer Segment:
Swiggy has a large following because anyone can use the food platform’s mobile app or website to operate it. Urban foodies use the application to place online orders for food from nearby restaurants. Swiggy likewise shows bug menus of cafés on its applications with the goal that foodies can browse a wide assortment. Due to adding a new customer type, the platform has seen an increase in users.
2. Propositions of Value:
Swiggy is a food delivery app specializing in delivering food with no minimum order requirement and effective online payment options like PhonePe, Paytm, Freecharge, Debit and Credit Cards, Mobikwik, Sodexo Meal, Zeta Food Card & Ticket Restaurants Meal, Cash-On-Delivery, LazyPay. The app aims to deliver food or essential items within 30-40 minutes. Swiggy created a user-friendly mobile application to gain customers’ trust and confidence.
3. Relationships with Customers:
Swiggy is well-known for promoting round-the-clock customer service as it operates through its online platforms. Recently, we have all witnessed customers receiving refunds when dissatisfied with the food or service. It has thrived by maintaining a positive relationship with issues and services for its customers.
4. Essential Resources:
The primary resources of the platform are:
- Local Food Delivery Boys
- Connections to Retailers and Restaurants
- An Easy-to-Use Mobile Application
- A Vast Database of Retailers and Customers
5. Important Actions:
The primary functions of the platform are:
- Managing partnerships with retail establishments, restaurants, and eateries.
- Managing partners in delivery.
- Management of orders, technical operations, and online platforms.
- Promoting and securing clients.
- Management of payment procedures and customer service issues.
6. Crucial Partners:
The primary partners of the food platform are:
- Retail Stores And Restaurants
The great key accomplices of Swiggy are the cafés and shops, which record on the application, and these are the stores that wish to convey their food to the doorstep of individuals, the critical accomplices of Swiggy like McDonald’s, Burger Ruler and some more.
- Providers of Delivery
Food delivery suppliers are called delivery suppliers. They can be full-time, part-time or consultants who work to bring in some additional cash.
7. Cost Structure:
The costs of food platforms are as follows:
- b. payroll costs associated with the application and website maintenance, c. Charges for administration and maintenance, d. Expenses for Marketing and Advertising, for example, returns, refunds, and other costs associated with disputes, and f. Revenue Model: Facility setup resembling a kitchen base.
How Swiggy makes money?
Swiggy’s idea to connect local foodies with local restaurants gave the brand advantage of an early mover. But the brand relies on restaurants and local delivery personnel to grow the business. And the company has to pay incentives to local delivery boys to keep the business going. So Swiggy’s revenue stream comes from different, multiple sources.
Here they are:
Swiggy charges 15-25% commission on total order bill (inclusive of Goods and Service Tax) from restaurants. The percentage of the commission depends on various factors like the number of orders, location of the restaurant, the commission charged by competitors, etc.
Swiggy doesn’t follow any minimum order model. It can deliver food for even less than Rs.100/- only. Instead of being a hurdle, it’s the most significant advantage for Swiggy as the app often receives an order value of less than Rs. 100/- for which Swiggy applies delivery charges.
Delivery charges rotate around Rs.10-20/- for orders less than Rs.250/-. Swiggy increases its delivery charges in times of high demand, rains, special occasions, or midnight delivery. If customers need emergency food at midnight, they have to pay a little bit higher, or customers prefer to order on time to avoid paying high. Either way, Swiggy wins.
Swiggy follows two advertising revenue models simultaneously: Banner Promotions and Priority Restaurant listing.
Swiggy started displaying and promoting banners of available restaurants based on regions and rates. Swiggy charges premium from restaurants in exchange for displaying their banners in its app.
Swiggy offers credit cards as well from where it generates income as an affiliate. The food-service brand has partnered financial biggies, including American Express, Citibank, ICICI Bank, HSBC, etc.
Other income sources
Swiggy keeps expanding its revenue sources along with its growth. It has started Swiggy Access allowing restaurants to set up kitchens at locations where they can’t reach. For this, restaurants pay higher than average commissions.
Swiggy added another source via Swiggy Super, a membership program for regular customers. It offers unlimited free delivery for orders above Rs. 99/-.Let us learn in detail about them as well.
- Swiggy Super:
Swiggy Super, a customer membership program, was recently launched by Swiggy. There is no fixed-price surge pricing, and it provides unlimited free delivery on orders over Rs 99.
A one-month membership for Rs 149 and a three-month membership for Rs 349 are two options available and are offered at an introductory price of Rs 49 and Rs 129, respectively. The expected revenue and repeat orders Swiggy foresee from this membership agenda will increase from this share.
- Swiggy Access:
Swiggy Access, a prominent kitchen-base-like establishment that accommodates the kitchens of diverse restaurants, including Swiggy’s private tags, was recently launched by Swiggy. This Swiggy Business Model for cloud kitchens will make it easier for restaurants to set up kitchens even when they aren’t there.
This anticipated inter-city model will revolutionize entry into tier 2 and 3 cities.
It started with 30 restaurants and 36 kitchens in Bangalore last year and has since expanded to Kolkata, Delhi, Mumbai, and Hyderabad.
Since its launch, Access kitchens have accounted for between 8% and 25% of market order volumes. On Access, restaurants must pay higher commissions than the average commissions the platform currently charges for delivery only.
Swiggy Go, a concierge service launched in 2019 and provides instant pick-up and drop-off service, is another revenue stream for Swiggy. The company makes money by assisting customers in sending, picking up, and dropping off items anywhere in the city through Swiggy Go.
Key takeaways from India’s largest online food delivery platform – Swiggy
From the hyper-funding wave of 2014-15, Swiggy is the only brand that continues to thrive and grow. Despite the fierce competition from Zomato, UberEats, and Foodpanda, Swiggy successfully made its way to food delivery space and became a unicorn startup. If you want to grow like Swiggy, follow these simple strategies consistently to pave your way:
Sharp focus on one thing
From Bundl to Swiggy, the founders and co-founders kept their focus on one thing: the logistics. They deeply cared about logistics operations and aimed to make it accessible through one click. If you care deeply about something, put that thing at center focus. It doesn’t guarantee your success, but gives you a roadmap to reach the success when you go through several trials and errors just like Swiggy owners.
Catch the trend
Once you know what you care, your next move is to acknowledge the trend. Founders of Swiggy were well-aware of the logistics industry. They knew that the industry lacks technology and speed to connect customers with brands with one click. They took advantage of the trend to give birth to Swiggy.
Build a growing team
A growing team puts constant efforts without failure. If the founders had accepted defeat after the shutdown of Bundl, they never have touched the heights of Swiggy. It is the combination of resilience and growth-mindset that kept the ball rolling. If you want to reach higher despite failures, gather a team with growth-mindset and resilience to keep going.
How much does it cost to build an app like Swiggy?
After knowing how Swiggy works and earns, you must be dreaming of making an app like Swiggy. And you are ready to inquire its cost to pursue your dream. Let’s discuss the app development cost in brief:
Cost of Swiggy-like app starts from $9000 and go far as well depending on the number of features you want to add. I would suggest you go for basic features to start your app journey and test the market. Later, you can hire app developers to add demanding features and eliminate the useless ones. It will keep your bank balance safe and gives you enough room to go through several experiments.
Do you have a restaurant business that you want to grow with an app? I have 15+ years of experience in Developing Swiggy-like online food delivery apps.
Swiggy is following a non-stop journey. The brand started with delivering food in one city and now spreading across India. Not only this, the food-delivery giant is diversifying its logistics business with emergency items like groceries and stationeries. Walking on a similar path needs constant growth and resilience in the face of adversity. Once you step forward, there is no going back.
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