Bring out your folks and knifes, the battle has begun! In recent months just like the clashes in every other aggregator segment, clash has started in food business space too. Challenging the deep discounting practices of online food delivery platforms like Zomato Gold and EasyDiner, restaurants in Gurugram and other restaurants under the umbrella of the National Restaurant Association of India (NRAI) launched #Logout campaign.
It all started on independence day when restaurants unites “to detox customers from addiction of discount and give the restaurant Industry freedom from aggregators who have distorted a vibrant marketplace by aggressive discounting and pricing”. In this campaign, about 2,000 restaurants stated that they would not be part of any “buy one and other free” deals or where they had signed up for 50 per cent discounts on food and drinks. Everyone loves a free meal. But deep discounting isn’t always great for businesses – restaurants are already struggling with increasing raw material and higher real estate costs.
In 2013, there were only a handful of online food aggregators. In 2019, the industry is huge that executes 80 million orders each month in over 500 cities. In all, food aggregators like Zomato, Swiggy, and Uber Eats deploy over 400,000 delivery boys and girls daily on the ground in the country. Ordering food online is convenient and restaurants gain from the extra visibility. But who is scratching in the profits? Five years into the food delivery boom, many restaurants have now come to the conclusion that they are losing more than they gaining. The biggest irritant is the steep discounting game which has started to hurt margins.
If that model sounds familiar, you just have to recall the relationship between taxi aggregators Uber and Ola with its drivers, and hotel aggregators Oyo and Booking with member hotels. In March 2019, drivers got united and forced the taxi aggregators to make some changes in the discounting and their incentives.
Currently, the major food aggregators in India are Zomato, Swiggy, Uber eats. These aggregators works on aggregator revenue model, in this aggregators provide them with the customers and in return charge some commission. The aggregators generally charge 20 -24% of the margin which include the food delivery as well and incase restaurant do self delivery, the margin comes down to around 15%. So to attract the customers, aggregator forces the partners to give some discounts and in most cases they pass on the discount burden on the partners which results in shrinkage of their profit margin. In case restaurants don’t give discount, then they are not visible on the top of the application, this result in sales drop of the restaurant. The restaurants are not left with any option and they are forced to give heavy discounts.
From last few years, it is all clear that game of unity can do anything if the forced is applied on right direction. “Unity is Strength” is a common phrase and it is true to its every word. Unity means being together. In this scenario as well restaurants have forced the aggregator to give a second thought on the discounting schemes and freebies. The current need of our industry is to grow in a mutually benefitting environment with healthy competition. Business association need to be united together so that we create a healthy platform for existing players and the new entrances.
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