Restaurants protest the steep discounts offered by aggregators
In the past five years, a wave of on-demand apps has revolutionized the services sector in India. The apps provide people with fast and easy access to products and services that once were billed as a luxury. Prepared foods, massages and taxicabs are all a click away.
The surge in smartphone penetration and cheap mobile data plans in India has helped fuel a surge in these on-demand services, enabling the creation of service aggregators such Uber and Ola for rides, Oyo for hotel accommodations, and Zomato, Swiggy and Uber Eats for food delivery.
For decades, India’s restaurant business was largely built on dine-in as well as deliveries in the neighbourhood. Even today, over 90% of India’s organized food services market is dine-in, according to a 2019 food service report compiled by the National Restaurant Association of India.
Just five years ago, there were only a handful of food aggregators in the country. But as online food orders started to surge, backed by some of the world’s largest venture funds, Zomato, Swiggy and Uber Eats have disrupted the market with close to a 10% market share.
Food aggregators have, in a sense, emerged at an opportune moment. Today, the industry caters to 80 million orders each month in more than 500 cities and deploys over 400,000 delivery boys and girls daily. Ordering food online is convenient and at the same time creates visibility for the restaurants.
However, what was supposed to be a symbiotic relationship between the two booming sectors is turning sour. Two weeks ago, a group of restaurant owners near New Delhi called for an end to the steep discounts on food being constantly offered by Zomato, Swiggy and Uber Eats. They argued that the costs were borne by the eateries, while the apps reaped the rewards. The protest, which has drawn public support from thousands of restaurants, has its own hashtag, #logout, with more than 2,000 restaurants signing up.
As food ordering and delivery increasingly move online, restaurants and delivery workers around the world are questioning the meagre share of the pie they get from the powerful gatekeepers. In addition to India’s Zomato, the list of new middlemen includes Grubhub and DoorDash in the US and Deliveroo in Europe. The platforms charge hefty commissions on orders and squeeze the profit margins of restaurants.
Another sore point is that neither Zomato nor Swiggy share customers’ contact information with the restaurant that fulfils the order, citing privacy concerns, but this means ownership of the customers remains with the aggregators. Restaurant owners claim this gives them no way to market directly or build long-term relationships with their best customers.
The protests have left aggregators struggling to find the right balance between customers and the thousands of restaurants they need to make the program valuable. They need to find a middle ground. The smartphone generation is addicted to on-demand shopping, so there’s no turning back.
In many ways this echoes the problems in other areas of online aggregation. App stores are a prime example, with antitrust cases ongoing and major providers such as Spotify and Netflix no longer collecting subscriptions through their apps in order to avoid paying the “app store tax”.
One of the clear messages for those trying to run such systems is that a winner-takes-all mentality is clearly not right, and all participants need to be able to thrive.
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