This article is written by Visa Kannan, a partner at Saison Capital, and originally posted on her LinkedIn post here.

Which is more profitable, Grab Deliveries or Zomato? If I was to make a guess, based purely on intuition, I would have probably said Grab.

A large chunk of its business comes from Singapore and Malaysia, both multiple times richer than India. This should ideally translate to higher AOVs, willingness to pay for convenience and an overall better margin structure. Also, India, as we well know, is notoriously tough to make money in.

But as I found out, this isn’t quite the case.

When you compare both Grab and Zomato’s H1-2021 results there are a few points that stand out:

1. The basic “take rate” for Zomato is 20% while Grab’s is 17%. This is probably explained by category mix – while Zomato is primarily a food delivery company, Grab does food and groceries.

Groceries have significantly lower margins versus food (~4-5% compared to 20-25%) and likely explains why Grab’s take rate is lower. It also might explain Zomato’s recent call to shut down its grocery delivery pilot.

But it’s interesting to note that historically this number for Grab has been as low as <10%, which is not fully explained by category mix.

2. Next, what really impacts Grab’s revenues is its spend on incentives – to merchants, delivery partners and customers – this accounts for ~14% of its GMV and basically erodes most of the “take rate” it makes from its partners. This is likely not COVID-related, since the pre-COVID incentive numbers were much higher for Grab.

Zomato gives out incentives too, but they report it as part of “Sales & Marketing” spends, which also includes spends on branding etc. so I’m assuming it’s likely to be lower than Grab’s.

Are the dynamics in Southeast Asia really so different than India’s for commissions to be so much lower and incentive spending to be so high?

Is it higher competition vying for the same set of restaurants and customers or just Grab’s attempt to accelerate the process of changing the habit of customers to shop for food and groceries online? If it’s the latter, it would be interesting to see how this trend plays out over the next 2-3 years. It also likely explains why in a similarly-sized market, Grab is 3x the size of Zomato.

(The above analysis restates some of the numbers from their filings and makes some market assumptions – all of which I’ve shared for transparency via the file in the first comment and in the snapshot below).


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].