But, food delivery apps are no usurpers; they've helped these very restaurants reach a wider consumer base. Can the two co-exist?
You’re a restaurateur running a mid-sized restaurant in one of the lower/middle class suburbs of Mumbai or Delhi. One night, you receive an order worth Rs 800 via a food delivery app. It’s good for you, isn’t it? Well, not really.
Say, the food delivery app offers a discount of Rs 120 to the customer. It means a 15 per cent loss for you. There is the 20 per cent commission you’ve got to shell out to the delivery company. Then, there is the GST. So, you’ve already lost 30-38 per cent of the total order value.
Now, imagine if the above order was worth Rs 500, instead of Rs 800. You've paid Rs 220 out of Rs 500 on discount and commission. That’s 44 per cent of the total order value, and you haven’t even added the GST yet.
Are you still smiling?
Anurag Katriar, president of the National Restaurant Association of India (NRAI), uses the above example to explain why restaurants are looking to reclaim the food delivery sphere from the likes of Swiggy and Zomato by urging people customers to ‘Order Direct’.
He is also the executive director and CEO of deGustibus Hospitality that is behind the popular Indigo chain of restaurants.
Since last year’s COVID-induced lockdown, food delivery has gained tremendous steam, while dine-ins have wilted. Restaurants, already reeling from a revenue crunch, saw their bottom lines fall further as a result of the commissions these food delivery apps levied on them.
The ‘Order Direct’ campaign was a reaction to these commissions that range from 15 per cent to as high as 40 per cent and above and a restaurant will see a standard rate applied to all orders regardless of value. Customers were being urged to order directly from the restaurants, either by calling them or through their delivery services.
This feud between restaurant owners and food delivery giants, which is now near boiling point, is not new and started in 2019.
The Indian Hotel and Restaurant Association (AHAR), with 8,000 members across the country, had decided to boycott the Zomato Gold scheme that offered steep discounts to customers. Gold members enjoyed the privilege of consuming the second-highest priced food item in their orders for free.
Remember when airlines didn’t like folks booking their tickets at a discount from travel aggregators like MakeMyTrip (MMT)? Being on Nykaa may be good for Maybelline, but the latter would rather have people shop from its own portal. And, how do news websites feel about their stories being published on the likes of Inshorts, a news aggregator?
So, does this all mean that the likes of Swiggy and Zomato are the dreaded 'elaichi' to the 'biryani' of restaurants? No, they’re not. The food delivery brands, more than anybody else, have aided restaurants when it comes to discoverability. They have allowed customers to access more restaurants and cuisines than in the earlier era of call to order.
"There's no denying that, 100 per cent," says Katriar.
And while online food orders rose, restaurants that serve them remained clueless about the customers. Turns out that food delivery apps don't share user data.
“They (food delivery apps) claim singular authority over data of my customer, who is ordering my food,” says Katriar, adding, “Swiggy and Zomato are middlemen/delivery partners/brokers. Can you every have a system where the broker has all the data and the owners don't have it?”
Only Domino’s Pizza gets access to user data because that is how it negotiated its partnership with these apps.
"Data is important, but the community that voices the requirement for data is the cream of the restaurant industry," says Dhruv Dewan, co-founder, Thrive, a SAAS company that helps restaurants set up their own delivery platforms.
The restaurants that form the cream in India are in the top 5-7 per cent, as per Dewan, and form close to 30 per cent of gross merchandise value (GMV) on Zomato and Swiggy.
Dewan tells us that not all restaurants, however, have realised the importance of data. If a restaurant is not interested in increasing its margin and is happy with Rs 50,000 take-home after removing all input costs... you can't do anything.
The number of merchants who want to increase their margins, get data and also get a bit more formalised, will increase. “Jio is solving half of that problem for us by getting users onto mobile and making Wi-Fi available to restaurants…,” remarks Dewan.
But despite the high commissions and refusal to share data, you can’t do away with Swiggy and Zomato because “they are way too big. The majority of people still order from Swiggy and Zomato,” says Shiv Bhasin, India marketing manager, SodaBottleOpenerWala, a popular high-end Irani cafe and bar, with outlets across major Indian cities.
As per Bhasin, his cafe’s idea to urge customers to order directly from it was to connect with them. “Several customers want to speak to us, tell us their preferences, change the dish they had earlier ordered… all these things can happen if they order directly from us,” he says, adding, “It (order direct) is another option and not a substitution to aggregators.”
Bhasin reveals that “90 per cent of the orders come from Swiggy and Zomato” and his cafe can generate around 10 per cent of the orders via its own platform. “It's our effort to keeping our orders growing.”
SodaBottleOpenerWala offers a flat 25 per cent discount on direct food orders and does not levy any packaging charge, unlike the “Rs 15 packaging charge on cart value on Zomato and Swiggy.” Why? Says Bhasin, “These are customers who've decided that SodaBottleOpenerWala is not their second or third choice. We are their first choice. So we, incentivise them - free delivery, no packaging charge.”
People order directly from a restaurant when they know what dish they'd like to enjoy. If not, they peruse through the food delivery apps.
He doesn't stress out about the commissions from these food delivery apps. “With the option (direct order) coming in, the whole commission debate may not hold much significance.”
If you visit a restaurant's social media profile and click on its bio, you’re redirected to a page where you can choose between home delivery and takeaway. Click on home delivery and you’re redirected to the said restaurant’s menu where you can pick food items, place the order, pay, and even track the delivery executive.
DotPe and Thrive are two of the most popular companies offering such delivery platforms. They’ve tied up with third-party delivery services, such as Dunzo, WeFast, among others, for the last-mile journey.
A point of concern here is that people are so accustomed to ordering from Zomato and Swiggy that they may be put off by the user experience of such platforms. Says Katriar, “There will be hiccups, but it is not very difficult. Even Swiggy and Zomato faced it initially, but it was ironed out. We also faced issues with third-party delivery at the start in Mumbai, not anymore.”
Says Abhinay Bhasin, vice president (Asia Pacific), Data Sciences, dentsu, “To keep customers engaged, DotPe and Thrive need to first become valuable to them (the customers) beyond the duopoly in this part of the industry. This means better and sustainable offers, a higher focus on customer satisfaction (CSAT), timely delivery and being able to service the growing expectations of audiences.”
"DotPe and Thrive currently come with what may appear to be better commercial propositions. A key challenge for them to be lucrative and viable alternatives to Swiggy and Zomato would be to continue to offer their costs of commission while maintaining lower costs of customer acquisition and driving a healthy flow of orders to all partners," he adds.
Is there any end to this tussle? Maybe there is. As per an Economic Times report last month (July 2021) "Swiggy is piloting a direct ordering product, Swiggy Direct, in Mumbai and has entered into agreements with restaurant partners for the programme."
As per Katriar, two things need to be done. “Levy a maximum cap on commissions and then a variable fee, depending on the order. If your order is up to Rs 300, I will charge you the maximum, say, 15 per cent. If it is from Rs 300-500, I will charge you 13-14 per cent. When your order is Rs 2,000 or more, I will charge you only eight per cent,” he signs off.
Photo of paper bag by Yu Hosoi on Unsplash