Whoever said everything good in life comes with a hefty price tag, surely turned a blind eye towards the Indian food-tech industry of the present times. Bringing content smiles and full tummies to millions of foodies each day with their bulky discount schemes and customer referral programs, food aggregators in the country did carve a space for themselves in the limelight over the past couple of years. But, as the dread of the #logout campaign looms over these online food delivery platforms, it leads one to wonder, at what note will the story finally end or, is this just the start of something even greater to come?
Undoubtedly, one can’t look past the intense heat soaring between these online food delivery platforms of late. With over 1.8 lakh delivery partners from over 90,000 restaurant tie-ups, Bengaluru based unicorn- Swiggy has established itself in more than 160 cities across the country. On the other hand, it’s arch-rival- Zomato with its 1.4 million active restaurant partners currently, has its presence in more than 200 cities throughout the nation. With a constant 30-50% discount scheme active on most of their deliveries at all times, these food aggregators have helped the entire industry gather large momentum at a very fast pace with such deep discounting programs. Be the judge yourself, would you rather have your favourite dish out of a large variety of restaurants, delivered right at your doorstep that too with the price slashed to half, on just one click, or, would you prefer getting dressed after a tiresome day, and going to the same old family restaurant for the same old tried and tested dish again? Of course, the former, right?
And this is exactly what gave more and more impetus to the deep discounting strategies adopted by these food tech companies. As per a Bloomberg report, companies like Zomato, Swiggy, as well as Foodpanda have invested nearly half a billion dollars only to keep their discount programs alive and running. But, alas, this happiness of the customers and these food aggregator companies was rather short-lived as the industry saw the whole bubble blow up on 14th August 2019, when restaurants countrywide started the #logout campaign in protest to the deep discounting schemes. Questioned by the restaurant association, whether customers today have turned into ‘addicts’ of the heavy discounts, all food aggregators across the nation found themselves battling for the fuel that has kept them going up and about for so long. The National Restaurant Association of India (NRAI) sent out letters to the four leading online food aggregators alleging widespread complaints by members regarding their deep discounting practices, lack of transparency and abuse of their dominant position to indulge in predatory behavior commercially and informing the terms of engagement. This is severely impacting employment nationwide, as well as, sustainability and growth of small restaurants and start-ups all across.
Amidst the #logout campaign, nearly 2000 restaurants across the NCR, Chennai, Kolkata, and Mumbai have decided to opt-out of such apps like Zomato, Easydiner, Dineout, etc. which provide heavy discounts, offers, and coupons. Much to our bemusement, it has been found out that aggregators promote these schemes very much to the core in order to stay competitive and ahead of all others. What is even more startling is that these discounts aren’t funded by the aggregators but by the restaurant industry, often under veiled coercion. No wonder the latter felt that these programs hurt their business value proposition and undermine their core values. On top of this, all proceeds generated as subscription fees by the aggregators go in their kitty only, and not one penny is shared with the restaurants that provide the life and blood to their business. Running on a thin margin of 10%, but, giving discounts up to 50% surely isn’t the way to go about for these restaurants, who have already suffered a lot due to the skyrocketing rentals and denial of an input tax credit, right? Zomato’s November’17 launch of its premium service, ‘Zomato Gold’, that allowed the registrants to get 1+1 on food and 2+2 on drinks, is a clear testimony to the aforesaid statement. The same goes for Dineout’s scheme, ‘Gourmet Passport’, which offers a membership program that gives one a buy one get one on buffets at over 800 restaurants all across the country. Dineout is also the host of the ‘Great Indian Food Festival’, an annual event that offers 50% off deals for a limited time in a plethora of restaurants pan India. Promised by the food aggregators that they would increase dramatically the footfall, as well as the revenues, restaurants countrywide, find themselves cheated and caught in this trap which eventually emerged to be a massive discount scheme that just rendered their sales unprofitable. The former also refrain from sharing customer data with the latter, which ultimately just makes them all the more disconnected to the customers at the far end.
On the front of the customers also, the picture is stained badly as one looks deeper into the issue. Unlike the retail businesses, food isn’t something offered to clear out the stock like the End-of-Season-Sale, it’s prepared fresh as per the customer’s likes. The rationale behind promotional offers should not be to make the customers feel like they are beating down the system, but, make it a win-win situation for the entire ecosystem. Discounting, as brought to the limelight again and again, if offered blindly to the customers, makes it a habit that is very hard to get rid of. If the reason why customers order on your restaurant is sole because of heavy promotional offers, then, it is very unlikely that they’ll get back to you once you stop the discounting. To reiterate NRAI President, Mr. Rahul Singh, “There is no doubt that the aggregators have created a platform to bring restaurants closer to the customer through the benefit of digitalisation, but is it making the customers ‘discount addicts’ under the guise of ‘customer is winning?’ One can’t sell at loss to attract customers, distort competition and create dominance through capital dumping”
This standoff between both the parties, of restaurateurs and food aggregators has clearly put millions of jobs and billions of revenues on the line. Now, what remains to be seen is whether this logout campaign would really be the eradicator of the deep discounting epidemic spread far and wide across India and the start of a better and sustainable model or would food aggregators eventually use their predatory stance here as well to turn the tables yet again on their side? Stay tuned!
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A highly driven and motivated individual, Aradhana is currently a B.Com undergrad at SRCC. Always on the lookout for being a better version of herself than yesyerday, Aradhana has always found her muse in pen & paper. We leave the rest for her articles to communicate to you about what buzzes around this budding writer’s head!