A new company seems entering India’s food delivery space, and it is from a segment of the transportation space that is familiar but new. Rapido, the bike taxi company that has gained popularity in Indian cities, is preparing to enter India’s crowded food delivery space. Bengaluru residents can soon get their McDonald’s burger or KFC chicken bucket delivered by a Rapido bike shortly. The company, backed by WestBridge Capital, is preparing to launch a pilot food delivery service in Bengaluru. It will begin with large restaurant chains, including franchisees of global chains such as McDonald’s, KFC, and Pizza Hut, and other fast-food chains and cloud kitchens that are expected to receive a high number of orders.

This is another chapter in the saga of transport companies attempting to foray into food delivery. We have witnessed this time and again in India and the world in general. Everyone is asking whether Rapido will be successful in this or whether it will be another flop like Ola’s failed food delivery venture, Ola Dash, which had to shut down despite the parent company having plenty of money and being popular.

Transportation and food delivery have been natural bedfellows in the logistics industry for years. The logic works on paper – if you already have a fleet of drivers cruising around the city, why not leverage that same fleet to deliver food? It’s this apparently obvious synergy that has tempted so many ride-hailing behemoths to dip their toes into food delivery. But as we’ve learned from experience, what appears flawless in presentation to the boardroom doesn’t always work in practice on the ground.

Let’s take a trip down memory lane to better grasp this trend. Uber, the international ride-hailing giant, launched UberEATS (now Uber Eats) in 2014 as a spin-off of its core ride-hailing business. Although it took off well in most geographies, it did terribly in India and ended up selling its India business to Zomato in 2020 for about $350 million – a clear acknowledgment that it wasn’t as easy to compete with specialized food delivery platforms as they had imagined. The company simply couldn’t compete with the operational efficiency and restaurant relationships that Zomato and Swiggy had built over years of concentrated effort.

Closer to home, Ola’s foray into food delivery has been extremely challenging. The Indian ride-hailing company had first bought Foodpanda India in December 2017 for about $200 million, showing that it was serious about competing in the food delivery space. But by 2019, Ola had significantly reduced Foodpanda’s business, transitioning from a marketplace model to a cloud kitchen model with its own food brands. Then in 2021, Ola had launched Ola Dash, which was meant to be a fast delivery service, but it was discontinued in 2022 because of huge losses and failing to compete well with other companies.

These earlier experiences are learning opportunities for Rapido as it aims to enter this competitive market. But Rapido seems to be adopting a different approach that might help it succeed where others failed. Rather than following the percentage commission model employed by Zomato and Swiggy, Rapido is going to ask restaurants a subscription fee to use the platform and a per-order delivery fee. This subscription model might prove to be more attractive to restaurants who have grumbled for years about the hefty commission rates (15% to 30%) commanded by market leaders.

The Indian food delivery industry has undergone a huge transformation over the years. Between December 2024 and December 2024, Zomato averaged 306,000 active restaurant partners per month, while Swiggy – interestingly one of Rapido’s investors – averaged 243,400. The two have created a sort of duopoly in which Zomato controls 57.1% of the market while Swiggy controls 42.9%, reports brokerage firm Bernstein. It will be extremely hard for Rapido to break into this robust market.

But Rapido appears to be targeting a different segment of the market. “Zomato and Swiggy are at Rs 400-450 AOV of food ordering. and although they’ve introduced cheaper, wallet-based options to boost their TAM (total addressable market), there is an immense set of consumers to cater to where AOVs will never exceed Rs 250, where Rapido will carve out a niche for itself,” said a industry expert privy to the company’s plans. This target of lower value orders can help create a new segment of the market which others have not covered yet.

Rapido’s growth story has been fantastic till now. The company, which had raised $200 million funding led by WestBridge Capital in September 2024, had achieved total sales of over $1 billion during the last fiscal. It has grown especially strong in the ride-hailing category, where it has grabbed 20% market share in the four-wheeler category, threatening big players like Uber (50% market share) and Ola (30% market share). One reason for its success is its three-wheeler and four-wheeler subscription model, which it now plans to extend to food delivery.

Rapido is introducing food delivery today, but growth in this category is slowing down. The food delivery category is still big, but it is growing at a slower rate than earlier. Additionally, more players are entering this category, such as quick delivery players like Zepto and Blinkit (funded by Eternal), which provide food delivery in 10 minutes, among other standalone players like Accel-funded Swish.

The food delivery economics are notoriously tough. Even with their market leadership, Zomato and Swiggy have not been able to become profitable. Zomato became profitable only in recent years after incurring losses for years, whereas Swiggy is still attempting to become profitable before its scheduled IPO. The business involves huge investment in logistics, technology, and marketing with wafer-thin margins that can be easily affected by fuel prices, labor costs, and competition.

The process of food delivery is not merely the movement of food from restaurants to consumers. It involves smart recommendation engines, customer support features, quality check features, and complaint resolution features. Developing these features from scratch takes a huge amount of money and time that could make Rapido less competitive compared to the larger companies who have honed these systems over decades.

Conversely, Rapido has some strengths. Its current fleet of bike taxis could be lower-cost to use for delivery compared to the fulfillment fleets of Zomato and Swiggy. Bikes are more agile in congested Indian cities, potentially making deliveries quicker, particularly during peak hours. Moreover, Rapido already has established brand presence in tier-2 and tier-3 cities, where the food delivery behemoths are still attempting to gain traction.

The restaurant subscription model of the company could be the game-changer if executed well. Restaurants are not pleased with the exorbitant commissions charged by existing delivery companies, leading them to inflate menu prices on these platforms. With a subscription fee model in use, Rapido can assist restaurants in maintaining lower prices for customers, benefiting both restaurants and consumers.

Swiggy is one of the two large food delivery companies. It also owns Rapido, and both of them have Dutch investor Prosus backing them. This is what makes Rapido’s foray into food delivery so interesting. It can be an advantage to them to collaborate, but it may also be an issue if Rapido starts poaching customers from Swiggy.

Looking at international analogs, we can observe similar patterns being repeated in other markets. In the US, Uber’s food delivery business, Uber Eats, has emerged as a major contributor to the firm’s revenue, particularly during the pandemic when the ride-hailing business suffered. But it operates in a fragmented market with specialist food delivery apps such as DoorDash and Grubhub. In Southeast Asia, Grab has managed to integrate ride-hailing and food delivery into a super-app that meets several consumer needs. These instances indicate that while the ride-hailing to food delivery shift is tough, it is not impossible to implement successfully under the right circumstances.

For Rapido, venturing into food delivery is not just a money-making strategy – it’s a strategic step towards becoming a more efficient urban transportation and delivery company.

“Rapido has expanded very rapidly in ride-hailing due to the three-wheeler and four-wheeler subscription model. but it has been able to expand because it entered late and is displacing Ola in the market. But the ride-hailing segment is not expanding very rapidly, so it would be nice for the company to think about new ways to expand in the near future,” said an investor with information about the company’s plans.

This growth strategy is part of a broader trend across mobility startups to provide ancillary services to drive steady growth and revenues. Apart from food delivery, Rapido is also venturing into selling insurance as another growth avenue. By offering additional services, the company is attempting to retain customers and increase their value in the long term, which are crucial metrics for any consumer-facing company.

While Rapido prepares to launch its food delivery business, it needs to take a cue from others’ successes and failures in this line of business. The food delivery business can be very profitable, but it has also been a graveyard for several ambitious entrants since they didn’t know its challenges. Rapido’s primary challenges will be establishing a reliable delivery network that can accommodate food (which requires different handling than passengers), partnering with numerous different restaurants, having an easy ordering process for users, and above all, figuring out how to make money in a highly competitive business.

In the months ahead, we shall see whether Rapido’s model of food delivery will disrupt Zomato and Swiggy’s dominance or turn into yet another ride-hailing firm to learn the bitter lesson that food delivery is not the same as giving rides. There is that old saying, “The proof of the pudding is in the eating” – that is to say, we will know the outcome through the delivery. Till then, everybody is observing Rapido’s pilot project in Bengaluru, which will be the first real test of the food delivery ambitions of the company.

Will Rapido succeed where issues brought behemoth companies like Ola and Uber to a halt in food delivery? Or will it find, like so many others before it, that all is not necessarily greener on the other side? Only time will tell, but one thing is certain – the Indian food delivery scene is about to get a lot more interesting. As consumers, we can hope for perhaps more choice and lower prices as these players fight for our money. As the saying goes in business, competition is good for the customer.