Rapido Food Delivery: India's Bike Taxi App Enters Food Tech

Rapido Enters Food Delivery Market in India

Rapido, a well-known ride-hailing service operating within India, has initiated beta testing of a food delivery service in Bengaluru. This represents the company’s initial substantial effort to compete with established market leaders Swiggy and Zomato in a rapidly expanding delivery sector.

Initial Testing and Locations

The 10-year-old company has commenced testing its food delivery capabilities across three key areas of Bengaluru. These include Byrasandra, Tavarekere, and Madiwala (BTM) Layout, alongside Hosur Sarjapura Road (HSR) Layout, and Koramangala, as confirmed by Rapido co-founder and CEO Aravind Sanka to TechCrunch.

Establishment of Ownly

To facilitate its entry into the food delivery arena, Rapido established a fully-owned subsidiary named Ownly, operating under the corporate entity Ctrlx Technologies. Regulatory filings examined by TechCrunch indicate that Aravind Sanka and Vivek Krishna, Rapido’s vice president of finance, are listed as directors of this new subsidiary.

Strategic Rationale for Subsidiary Creation

While no specific justification was provided for the subsidiary’s formation, it is speculated that this move is strategically designed to mitigate potential conflicts of interest. This is particularly relevant given Swiggy’s existing 12% minority stake in the ride-hailing startup.

Swiggy's Investment Re-evaluation

Recently, Swiggy communicated to its shareholders its intention to reassess its investment in Rapido. This re-evaluation stems from concerns regarding a potential conflict of interest that could emerge in the future.

Ownly App and Pricing Strategy

Ownly has launched its Android application on the Google Play Store. The app offers food from local restaurants at prices approximately 15% lower than those found on Swiggy and Zomato.

Commission-Free Model for Restaurants

This competitive pricing is achieved through Rapido’s unique business model. Unlike other food delivery platforms, including Swiggy and Zomato, which often charge restaurants commissions of up to 30%, Rapido implements a fixed fee per order. This approach was initially proposed to restaurants in June.

Leveraging Existing Fleet

Rapido possesses a substantial fleet of approximately 10 million vehicles throughout India, with 5 to 6 million being two-wheelers. The company is utilizing this existing fleet to handle food deliveries, in addition to its current taxi and courier services.

Optimizing Delivery Efficiency

To minimize fuel costs and reduce delivery times, Rapido will prioritize displaying restaurants located within close proximity to customers. Furthermore, the app will curate menu selections to maximize profitability while ensuring adequate product visibility, as revealed by a Rapido investor.

Data Utilization from Swiggy Partnership

Through its previous delivery work for Swiggy, Rapido gained valuable insights into peak demand times and popular restaurants. This data will now be leveraged to enhance its own food delivery operations, according to an investor familiar with the company.

Contractual Limitations

The existing agreement with Swiggy permits Rapido to utilize this acquired data. However, it does restrict the startup from entering into agreements with Zomato or other competing food delivery services.

Rapido’s Evolution and Expansion

Founded in 2015, Rapido initially began as a bike taxi aggregator. The company subsequently expanded its services to include auto rickshaws, parcel delivery, and third-party logistics. In 2023, Rapido entered the cab market to challenge Uber and Ola, adopting a subscription-based model as a differentiator.

Strategic Partnerships and Valuation

Rapido also collaborated with Gogoro, a Taiwanese battery-swapping electric two-wheeler manufacturer, to integrate their vehicles into its bike taxi fleet. These strategic initiatives contributed to a valuation increase, resulting in the company achieving unicorn status last year.

Market Projections for Online Food Delivery

The Indian online food delivery market is projected to exceed ₹2 trillion (approximately $23 billion) by 2030, as indicated in a report by Bain & Company and Swiggy. Currently, Zomato holds the largest market share at 58%, while Swiggy accounts for the remaining 42%, according to Bernstein.

Funding and Investor Base

To date, Rapido has secured $574 million in funding across 13 investment rounds, as per Tracxn. The company operates in over 250 cities and processes more than 3.5 million rides daily. Key investors include Prosus, WestBridge Capital, Nexus Venture Partners, and Think Investments.