ZOMATO- on time or free

On-Time or Free- ZOMATO

 

Two weeks back Zomato announced that they were introducing a new feature on

their app. The premise was simple. You place your order and you get an estimate of

how long you’d have to wait before your food reaches you. If the order makes it on

time, you get nothing. If it doesn’t, you get the food for free (up to Rs. 200). All you

have to do is pay Rs. 10 upfront, and opt-in. They are calling it — the ‘On-Time or

 Free” scheme. And almost immediately people started comparing it to insurance.

Sure, the resemblance is uncanny. You pay a fee upfront and you protect your

downside. And since Zomato somehow found a way to sneak into the highly lucrative

insurance business, people went bonkers. But the hype-train has got a bit out of

 hand.

Granted this is an ingenious feature, it’s a beautiful scheme and Zomato is likely to

make a windfall. But there is more to this story than what meets the eye.

For one, unlike actual insurance policies that are designed to protect you from

substantial monetary damage, Zomato’s cover totals a few hundred bucks. Think

about it, all you’re getting is a free meal worth a couple hundred rupees. Nothing

more.

So, if you are paying Rs. 10 for the “on-time” delivery option, you'd better have a

really good reason to want your food on time. Now I am not saying that these

 scenarios don’t materialise. Because they do — Imagine you’re ordering for a guest,

 or maybe you have to run to the airport after lunch, or if you just have too much

 money to spare.

Sure, you’ll opt-in. But I don’t think these scenarios are as common as people like to

believe. However, that only puts us in another quandary. Based on early impressions,

this scheme is a certified hit. So, if the need is not as abundant, what then explains

the surging popularity? I mean, there are three people sitting on my table right now

 who have already used the service multiple times. How do you explain this discrepancy?

Well, the answer is simple. These people are gamblers. The team at Fin shots has a

gambling problem. There, I said it.

These people aren’t opting into the scheme because they see the utility in buying

 Food insurance. They are opting in because they are peddling wonky math that

 makes them believe there’s a chance of hitting the big payout. Here’s how this logic

 works. You begin adding the numbers and you quickly see that you can break even,

if the order is late just one time out of ten, assuming your average order value is 100.

 This gives you the flawed impression that there is a potential to make some quick

money if you only keep betting for a while. And eventually, when Zomato does screw

 up, you’ll get your free food and recoup all your money in one single go. It’s fool

proof.

And to top it, this thing is really addictive. You watch the screen, the delivery

executive is a couple of blocks away from the destination. 3 minutes on the clock.

 The tension ramps up. He pauses for a split second. You check the clock again.

There’s no way he’s going to make it. And then he banks left. He banks right. And

 before you know it he’s ringing the bell. Just one minute more and you would have

him. Missed by a whisker, you think.

And therein lies the problem.

Because if you know anything about gambling it’s that the house always wins.

 Zomato is working with datasets large enough that could probably tell them if you

have heart disease. Okay, maybe not that large. But it’s large enough for them to

 make a very accurate assessment of whether this business is going to be profitable or not. Right

now the service is only available for select restaurants. So, I am pretty sure the guys

at Zomato have accounted for all exigencies to ensure that the insurance plan is

fool proof. So, they are always to going to beat you and they will make all the money.

But what happens to the gamblers? Well, they will eventually find out that they can’t

beat Zomato at their own game. And when the addiction finally wears out, they’ll

start using the scheme when they actually need their food on time, just like everyone else.

So, by all accounts, Zomato will make a windfall in the next few months as the

 scheme gains in popularity (thanks to the gamblers). But the momentum is unlikely

 to sustain.

Sure, once Zomato’s data sets are more comprehensive and they can fine-tune their

logistic support to deliver on-time 99+% of the time, the premium (Rs. 10) might

eventually drop. Maybe it will drop to a point where it’ll become insignificant for the

average user (Rs. 1 or 2). And maybe everyone will start opting into the scheme then.

But that day is still a fair bit away. Until then, don’t gamble eh?