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Zomato Ltd
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Ladies and gentlemen, a very good evening and welcome to Zomato Limited's Q3 FY '23 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 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.
[Operator Instructions] The first question is from the Ankur Rudra from JPMorgan.
So first question is you mentioned several drivers of the growth slowdown in your prepared remarks and 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?
Thanks for your question, Akshant this side. Look, I think for us, it's very hard to measure market share on an ongoing basis because we compete with multiple players and most of them are -- and some -- 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? so I think the majority of the slowdown, I would attribute to the general macro -- industry-wide macro than anything else.
And 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 -- if there was no growth?
So -- yes, 2 elements there. I mean, Ankur eventually the profit -- the absolute profit is a function of growth in the business and your margin expansion. So as you would have also seen in the December quarter results, our contribution margins in the business have expanded compared to the September quarter. So 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.
And once growth comes back, that will only accelerate the absolute profits from the business, which should help us get there faster and over time, generate profits in the business?
I mean, maybe I can take this forward as a concern among investors that is there any kind of trade-off between growth and profitability here? And can growth and profitability happen at the same time?
Yes. I mean there is always a trade-off of some, there is always some kind of trade-off, right? I mean, eventually, you can spend more, you make delivery free for every customer, of course, you will get growth, but that's not the kind of growth we want, right?
So in an environment where there is a 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 to that extent, I don't think we are trading good quality growth or margins at this point.
Okay. So, the last question on Zomato Gold, is this a cost correction and an acceptance that you perhaps shutting down Pro Plus was not right, while your competitors still had a very aggressive program?
So think this is a very different program from Zomato Pro, right? So Zomato Pro essentially had a free delivery as a feature, and which apply to all orders. So you would have seen that Zomato Gold has multiple other benefits in addition to that. And the free delivery is on only certain orders.
So I think what we've done is -- I mean, even before Zomato Pro Plus, we had a Zomato Pro program and like 2, 3 years ago, we had Zomato Gold, so I think there was a lot of learnings that we had in terms of what worked, what did not work for customers, for our P&L, for restaurants. And 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?
So 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 and developing that also took some time. So I don't think of this as a call that we took, which we sort of now collecting. 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 going to be extended to Blinkit?
So we are not sure of, we don't want to comment on that, Ankur. So far, we have kept it expected to the food business. But I mean this is a business call we will take down the line, if we think it makes sense.
Next question is from the line of Mr. Sachin Salgaonkar from Bank of America.
I have 3 questions. First question, Akshant, I just wanted to understand if we could give a little bit more clarity on the mix of GOV, i.e. did in this quarter, we see a stable AOV and the order frequency was lower, or any data point you could provide?
And going ahead, how should we look at the drivers, which is the incremental GOV would be driven more by increase in order frequency or it's still AOV, which will continue to increase?
Thanks, Sachin. So 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? So we attribute that to the general slowdown that I just spoke about as a response to the previous question.
So going forward, I think -- I mean, as we're now seeing the recovery coming in the business already, we are seeing more customers coming back, so we expect to continue growing both on MPUs and frequency going forward?
And a combination of growth across these 2 should drive the order value -- order volume up going forward? As far as average order values are concerned, I mean, a large part, these are -- I mean, this is an outcome metric of the context and the environment, right?
So we've seen a decent bit of AOV growth in the last 3, 4 quarters. Part of it is driven by inflation, which has led to the response increasing their menu prices, which we've also seen with a number of listed QSR players in the recent past.
And 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, particularly and so on.
So I think some of these factors will continue to play now -- on balance, whether the order values continue to go up or they come down slightly. I think it's hard to predict. But 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.
Very clear. Second question is on the take rate. It appears to have been now stabilized, so just wanted to understand, is it the new normal? Or we see room for it that improve?
Yes. So I'm assuming you're referring to take rate as a combination of the decommission revenue, adds revenue and the customer delivery charges, right?
Correct.
I think as an aggregate, we think there is still room to grow here. We added about close to 23.8%- or 24%-decade ballpark right now in the last quarter. And 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.
So majority of the growth here could come from restaurants are 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.
Very clear. And last question is, just wanted to have a little bit more clarity on consumption slowdown. And the reason is there are certain mixed signals coming from QSRs, right? Certain QSRs as being slow down, others are not. So question to you is, is there any particular segment?
And I read your obviously, reports where you indicated, which all segments were -- you seeing a bit of impact, but 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?
So 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 given we -- 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 other side, right.
So -- I agree with you that 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. All the best.
Next question is from the line of Mr. Gaurav Rateria from Morgan Stanley.
Am I audible?
Yes, Gaurav. Go ahead.
I have 3 questions. The first is on the frequency. If I look at the higher frequency users as a percentage of total annual transacting users that has actually gone up, which would actually help frequency at the company level. So which cohort of customers, which basket of customers, you are not seeing a major increase in frequency or where there's a key roadblock? And what are the initiatives that you're taking to kind of change that?
This is Kunal here. So you rightly pointed out that the power user of our customer cohort is sort of has gained, but -- next to that, we've also talked about the increase in annual transacting users. And if you see that number is also pretty healthy, 23 million new users added.
And we've also mentioned that for the last quarter, as well that new user addition has been healthy. Now 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.
So 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. Therefore, we presented the power user cohorts as well for you to understand how the health of the business is improving.
And Gaurav, just to add here, I think if you're specifically -- if your question was specific to the last quarter, even these power users, the frequency went down in that quarter, right? So the data here in this chart is on an annual basis, where we see ratio of power users and the frequency going up. But 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.
The second question is that it looks like you have rolled back some part of your operating profits in the form of indirect cost because that has grown like 14%, 15% on a Y-o-Y versus a very muted trend in the first half of the fiscal year. So what are these investments that you're making? And how are they going to yield reserves and kind of reflecting a better profitability overall?
Gaurav a 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 in -- 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 if you look at the same quarter last year, there was a bit of a jump in that quarter. But if you look at the average for the last 3 quarters, that would be in the range of 1% to 2% growth.
On an annual basis, if you look at these numbers, that would be more in the range of 12% to 14% kind of growth, right? So therefore, and I think it's not meaningful when you look at it from an annual perspective. I hope this answers.
Yes, sure. Last question. Any color on Everyday, Zomato Everyday? Is it going to be a cloud kitchen, what form and what factor? I'm just trying to understand, is it going to be asset-heavy kind of investment in the form of new opening kitchens to cater to the home cooked food?
Yes. So 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. So we are currently planning to experiment with the infrastructure that we had anyway is built for Zomato Instant. So we're using the same finishing stations to roll this out in the next few weeks in Gurgaon and Bangalore. These are the 2 cities where we had Zomato Instant.
And depending on the offtake and what we learned from there, we'll sort of decide on how to expand going forward from there. But it's not -- I mean, compared to Zomato Instant, it's only going to be less capital intensive than what Instant was.
That's very helpful.
Thank you, Gaurav.
Next question is from the line of Mr. Vivek Maheshwari from Jefferies.
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 while we are talking about slowdown, you have also mentioned that you are witnessing green shoots, right in January, so can you just comment on that? Has there been any specific, let's say, customer cohorts, which have done better? Is it like you are seeing a pickup in exit January, which is what we should look at in the fourth quarter? Can you just elaborate on that comment, Akshant?
Yes, Vivek. So I think what we meant there was that last, I think, a couple of weeks, we've been seeing the app opens and our business go up, which sort of indicate -- I mean, which is after a sort of over a period of time over the last 2, 3 months when we haven't seen that.
So that is telling us that perhaps the slowdown has bottomed out, and that's sort of our conjecture at this point, but we'll need to see how it unfolds in the rest of the quarter. The demand patterns whether they change meaningfully or not.
Part of this growth could also be attributed to us launching Zomato Gold, right? So there is that attribution also. So I think still early days, but I think whatever signals that we are able to see, it seems like it's only going to get better from here from a demand standpoint.
Okay. Got it. And the other question, Akshant, is what Ankur said at the beginning and you responded 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?
Now based on the current contribution margins and, let's say, these move up, does that change the trajectory of growth or 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?
So 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 2, 3 quarters also, right? So we are not making that trade-off between a good quality growth, which will sustain and compound for short-term increase in margins.
I think the lack of growth right now, as we have spoke on multiple times is because of the context and the industry slowdown. Now how quickly that changes and in what shape and form the growth comes back in the next 1-quarter, 2-quarter, I think it's very hard for us to comment.
But long-term, if you take a 4-, 5-year view, as we have mentioned that we remain bullish on this space, and the market is still underpenetrated and there's a long way to go. So I think we should see healthy compounding over a 5-year period in the business, but short-term is relatively harder to predict at this point.
Okay. And a follow-up to that Akshant. So when you say that, that you are not pulling back on investment, from a margin standpoint, does that mean if I take -- forget about the next few quarters, but let's say, if we take a 3-, 5-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% to 7%, or we will see some stability in contribution margin.
And if the macro is conducing you can still get to, let's say, 25%, 30% kind of a Y-o-Y growth. How do you think about this on the margin cyclicality is something that I'm unable to fully appreciate?
So Vivek, I don't think that we are going to have that large of a standard deviation in the margins in our business, right? So while it can go up and down over a period of 4, 5 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?
But like-to-like in the same city where we are already present today, I don't think there is going to be a massive swings in margin going forward.
Sure. And my last question is on Blinkit. So with the tough macro, and I know you are at very early stage in that, any headwind that you are seeing on that business particularly on the demand side, at least in the existing in the -- I wouldn't say mature, mature job locations, but any pullback in the consumer demand or any down trading that you are seeing in the market where you forayed early?
Vivek. This is Albinder, I'll take this. Sir, so far, like we mentioned in the letter, we are seeing good user growth. We are seeing our order frequencies are healthy. And we are also seeing new user growth being at a very healthy level accounting -- continuing forward.
We saw about 3% dip in our average ticket size. And part of that, we are able to attribute to consumers buying smaller packs, which we -- which could be indicated that maybe consumers are going to consume this during this period.
However, that is a strong might, it also might be consumer behavior, the kind of customers that we're acquiring at this point of time. So 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 underpenetrated in the cities that even we are already large, and at the same time, our city spread especially compared to, for example, the Zomato business is very, very small. 90% plus those are only in the top 7 cities.
So I think we would not be sort of at this point of time, be able to be the predictor of whether macro trends are affecting this segment.
Okay, got it. And Albi another question and which will be my last one, 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 to -- are you -- and your numbers are obviously speaking for itself? But what is your purposes between growth and profitability at this stage?
So Vivek, I think we will let the numbers speak, and they are basically showing that our business has a high amount of operating leverage. So for the last 2 quarters, the business has grown significantly, while moving steadily towards profitability. And I think we will continue to see this trend.
Our immediate obviously, focus is to be a contribution-positive business. We're at about minus 4.5% right now. And 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 ad of the kind of infrastructure investments that we need to make judiciously, while improving the supply side of our business, and 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 more worried on the -- we are spending more of our time on the supply side of the investment and what would be the right time for us to sort of start making them?
Got it. Got it. Quite interesting. Wishing you all the very best.
Next question is from the line of Mr. Vijit Jain from Citigroup.
I have a couple of questions on those annual unique transacting customer data points that you shared. Now if I look at 2022 versus '21, just looking at the previous year's customers there, it looks like the churn rate went from about 10% in '21 to about 30% in '22. Do you think this is attributable to the rollback of Gold?
And a related question to that, all these end of quarter trend that we see in NPL 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 will come back. That is my first question.
Yes, so I think absence of having a membership program definitely did have -- I mean, definitely did impact us the last quarter. So I think we're covering from that now. And to some extent, that has played a role in some customers at pricing and lower frequency that we saw in the last quarter.
But 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...
So basically, I just looked at 2020 customers. And if in 2021, if you remove the new customers from that number, and compared with the previous year. Just a simple math on that. It looks like, yes, you lost 15 million of the customers you might have had in 2021, in 2022, and then you added another '23, something like that. I think that's what I did.
Yes. No, I think a large portion of our customer base is very infrequent like which quarters less than 4 times a year, right? And every year, a lot of these customers keep coming back to our platform.
So the 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. So we're not worried about retention yet. I think largely, everything is on track as far as user retention and user acquisition is concerned.
And 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 a material cost savings there? And if you can overall give a sense of the -- how you look at the Gold program in its entirety from -- on a P&L perspective, that will be great.
And 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 multiple things. 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. So as we mentioned that the pace of user addition remains healthy. So which means you're not cutting down on marketing and user acquisition spends. All of that continues.
And -- I mean, the second question on specifics of Gold at this point, we would not want to comment on how it evolves and how we think it will shape up. I mean, those are some things which will evolve in time and as we get more data and things sort of, we want to right now not share much about, but 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?
Right. And sorry, just the first part of my question, Akshant, the shutdown of those 250 very small cities. I know the GOV impact is miniscule, but is there material cost savings there from just being present in those cities?
Not very material, Vijit.
Okay. All right. Those are my questions. Sorry, one last question, if I can. Just if you can give an update on the overhaul of the dining out business. If I just look constantly at your nonfood non-Blinkit business, on a Q-o-Q basis, appears to have improved. Is this mostly Hyperpure?
Yes. So on -- Vijit, I think hyperpure numbers are disclosed separately. And if you look at -- I mean, as far as others is concerned, we have given some color of what led to that sharp growth in the Q-on-Q revenue in question number 13, I think.
Okay. I'll just hit that. And just if you can give an update on dining out overall.
Section #11, yes.
Okay.
Yes. So here, partly, one, there was contribution from our services that we offered to Talabat in the UAE and our off-line events, Zomaland, et cetera, which came back after a [ Hyper ]. So that was partly the reason why there was an increase that you saw.
So it's not so much due to the monetization of the dining out business, where we are still in build out more like we've mentioned.
Next question is from the line of Mr. Manish Adukia from Goldman Sachs.
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 provide 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 maybe help us to provide some more color?
And a related question to that is on the annual transacting users you disclosed for 2022, which is about $58 million. And currently, you have about $170-odd million of [ MTUs]. What does it take over a longer term, let's say, 2-, 3-year period to convert a large number of these annual transacting users into MTUs, that would be my first question?
So Manish answer to your second question is actually also a response to the first question. So I think all of these initiatives that we have 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. And hence, a large portion of our 80 will start converting into [ MTU ]
Now within those 2, 3 things that we mentioned, I think as Zomato Gold, of course, is going to 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 you are able to execute that well and sustainably.
So 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.
So yes, I think all of these things are important and continuously fixing essentially the U.S. 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. My second question is on Blinkit. So you mentioned that Blinkit can potentially also be profitable at AUVs of about 20% lower. So I just wanted to understand, are you actually expecting AOVs to decline by that magnitude over time? And if it does, what would be the offset for profitability in that case?
And a related question, Akshant last year, when you announced the transaction with Blinkit, you'd mentioned, and I know you said specifically, it was not a guidance, but you said that in the next 3 years or less than 3 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 the profitability actually be sooner?
So I'll let Al take the first one. I'll respond to the second question, Manish.
So 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 economics, right? So I think -- I'm not either guiding to what -- to anything different than what we said earlier. I think the next 2, 3 years is the horizon, which we should stick with for this business getting to profitability. But if the progress continues at the pace at which -- at what we have seen in the last 3 quarters and perhaps we'll get there sooner, right? So we'll have to sort of wait and watch on that.
Manish, this is Albi. I'll take the first part of the question around AOV. So one of the drivers of AOV 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.
So 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. So as we introduce new use cases, which we did, for example, introducing fresh sweets during Diwali introducing a lot of SKUs around Dia or takes 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 and some of them obviously are higher than the average grocery basket ticket size. So 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 breakeven 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, that has gone up.
So I think that gives us the confidence that we can -- 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 referring to in that answer.
Just a quick follow-up there. So 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? And I meant in, let's say, hypothetically in the next 6, 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 like you did in the case of food delivery with the case of Uber?
Look, as of now, we are 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. And I think if there are 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 fixing our business, and also delivering great experience to the customers. I don't think they're going anywhere beyond that.
Next question is from the line of Mr. Swapnil Potdukhe from JM Financial.
I have 2 or 3 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 will be ascribed to food delivery vertical? And will it be considerable, while calculating our contraction margins?
Yes. Swapnil, that's right.
Okay. And -- okay, the second question is with respect to Blinkit. I see that your dark store count same share come down by around 10% versus a couple of quarters back. So what is the thought process here? Have we closed on some operations in a few cities because in the shareholder letter, you have also mentioned that addition of 30% to 40% store additions in the next year? So what is the strategy over here?
Swapnil. This is Albi. So 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 eviction on particular geographies. So some of those stores are in the process of being moved into other different locations, or we are putting in more stores because the demand is higher.
So what you will see is that we will be adding more stores going forward at a reasonable pace. And we have not pulled out of any geographies. We have not pulled out of any cities and the plan is for us too soon also, 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, so 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 have put a lot of our initial focus on, and even expand our footprint within the cities that we are operational.
Just to give you an example, like we only serve about 40% of the geographical area of [indiscernible] So we would like to increase our footprint over there is that market is something where we are growing and hence it's potentially becoming a key market for us.
Right. And just one more question on the food delivery side. So I would like to understand the cohort GMV movement. So have you seen a slowdown of GMV growth in only those cohorts that were acquired during COVID, especially in let's say, in FY '21 or '22, or there has been a slowdown across pre-COVID cohorts as well?
Swapnil. We -- 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. And 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, you do premium travel on the sort of mid-income side more driven by macro.
So these are some of the trends that we saw, and which is what we put out in our letter. But outside of that, I don't think there is anything very noticeable.
Right. And just one last question, if I can squeeze in. So in the Gold program, we have offered some discounts on certain restaurants. So I just wanted to understand who will be bearing the discounts, will it be the restaurants, or the matter is also taking some burden of [indiscernible]?
They're all response funded discounts, Swapnil.
Okay. Got it.
Ladies and gentlemen, in the interest of time, we will now take the last 1 to 2 questions. The next question is from the line of Mr. Aditya Suresh from Macquarie.
Akshant, maybe for you, right? So we had Zomaland in this quarter, brand marketing expense went up. So what are some of the metrics you're looking at to judge the efficiency of spending versus, for example, some of the more direct levers like say, increasing platform discounts?
Yes. So I think like there is platform discounts, there is digital marketing. There is a broader mass media marketing, and then we also market through some of the events that you mentioned, right?
So I think ROIs for each of these channels of marketing have to be calculated differently and looped differently because some of them have smaller feedback loops, some of them have slightly longer feedback loops.
So 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 spend to those channels versus others.
And some of these things are also seasonal, right? So some kind of brand marketing works in a particular quarter versus others. So now that we have a 4, 5-year history behind us, I think we're getting better at this every year going forward.
Okay. And I appreciate that the conditions are dynamic and multiple levers that your kind of solving for at all times, right? But if I just have to tactically ask you the next, say, 6, 12 months, what are the top 3 KPIs that you are managing for?
I think there is -- I mean there are a bunch of things that I think eventually, everything is about growth and profitability, right? These are the 2 metrics in addition to customer NPS or stakeholder NPS. So I think if you were to ask me for 3 metrics, I would say, overall growth of the business, overall profitability and the stakeholder NPS in our ecosystem, I think those are the things we really care about.
If I could, at 1 level below that, Akshant, what would be the steps which are kind of prioritizing towards, whether it'd be, for example, any of the contribution margin levers or the growth levers of products? Any specific measures you want to speak about?
So I think these are all business discussions that I don't want to share, how we think about our business and strategy on this call, right? So I don't want to be that specific. I hope that's okay.
Next question is from the line of Mr. Mukul Garg from Motilal Oswal Financial Services.
Akshant, just -- I know it's still fairly early, but any initial reaction on the gold impact on business? Are you seeing any increased ordering from the power users? And also given that the threshold for free delivery or Gold is INR 199, which is particularly half of your AOV, is it fair to assume that the -- there will be a bit of a drag on AOV because of Gold scaling up?
So Mukul, I think on the overall impact of Gold, I think it is very early right now. We are barely 2 weeks into it. I think the only thing that we wanted to share at this point, is we have shared in our letter is that we are now close to 900,000 members, which the program is selling rapidly. But 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 AOV baseline of INR 199 also helps move some lower AOV orders to higher AOV. So on balance I would not conclude that the order value will come down because of it. It might also go up. So we'll see evidence of that as we go along. But right now, it's very early in the journey to be talking about any specific things.
Sure. Secondly, on -- if I take a slightly longer-term performance in the food delivery space over the last 4 to 5 quarters, your Y-o-Y growth has been coming off. And right now, you are growing at the same pace at which broader QSR space has grown in Q3.
How should we see the long-term growth perspective of Zomato? Is it still fair to continue to assume that the growth will be meaningful because of the early stage of the food delivery industry in terms of adoption? Or should we now start seeing some convergence with the broader food industry, given the large revenue base as well as the infeasibility of scaling up in smaller cities?
Mukul, this is Kunal here. I'll take this. I think we've also adequately answered this in the SHL. I think, obviously, the Y-o-Y growth has come off a little bit because of the last quarter and the quarter before that being slower growth quarters. But 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. And so is our sort of our customer cohort.
And I think these are fairly good indicators that overall, I think we are heading in the right direction. There may be a couple of quarters of ups and downs that we see and largely linked to macro events. But we don't see anything structurally concerning at this point in time.
Fair enough. The last one for Albinder. Thanks for providing a perspective on leadership in the letter, but I just wanted to clarify, have the key leadership roles been assigned to other members of the team? Or have they been consolidated with the current leadership for the time being?
This is actually a mix of both here. I'm also doing a bunch of things, Akshant has also taken a couple of things up, and we also have a strong bench. So with the combination of all these 3 things, we are good for now.
Sorry, sir, just to take this forward, how do you see this play out over the longer term? I know you have addressed the unusually high volatility in leadership. But given the bandwidth and the multiple roles, which you are jumbling at the moment, are you expecting to retain whatever you have take additionally? Or will this -- will be kind of given to suitable candidate sets as you see them come up?
So far, we can fit it into the 12 to like 14 hours a day. So it's like perfectly fine, but we are always constantly on the lookout for talent. So mix and match again.
Got it.
Thank you. Ladies and gentlemen, we will now conclude this conference call. Thank you for joining in, and you may now disconnect your lines.