News & Analysis

Are Restaurant Owners Taking on Swiggy, Zomato?

A recent report suggests that this could be so as the commission costs for delivery seems to be benefiting neither the restaurant, nor the customer

A recent report published on ET Prime had an interesting story to tell. The author received a delivery from Swiggy with a pamphlet secretly tucked away inside the delivery bag. The restaurant that had used the delivery agent was making a direct discount offer to its customer if they dumped Swiggy (or Zomato) and called them directly. 

In fact, this has become an increasing trend amongst restaurants who prefer using Dunzo to deliver at cheaper rates while customers too are awakening to the idea that these large delivery agents are charging them rates quite beyond the service rendered. In Chandigarh, an Indian army soldier found that a short walk to the restaurant saved him Rs.110 on an order. 

“The delivery costs and other overheads were charged by Swiggy as per government rules on GST and other charges, but for me it was easier to just walk across and pay the actual cost of the Dal-Chawal and Roti I wanted,” he says, while expressing shock that even the restaurant had a different cost for the same order, if received via Swiggy.

This isn’t a new shift though 

Just so that readers are aware, this isn’t a recent shift. Restaurants had started the “Order Direct” campaign last year and by the looks of it the momentum is growing. Into this mix comes the government’s one network for digital commerce experiment where players like eSamudaay are creating local digital entrepreneurships that keeps costs cheaper and customer data open. 

Till date, only the large restaurants had the required financial heft to shift away from Swiggy and Zomato towards the director orders. However, with the government’s ONDC program shifting gears, it could be a matter of time before smaller players enter the fray and provide hyperlocal delivery apps that store data locally and benefit the local community first. 

“The way to look at it is simple. Instead of multiple apps providing delivery options and services in a community such as a large town, what stops an entrepreneur from creating a hyper local app that provides it all – from food to grocery and from electrical works and plumbing to medicine delivery and even laundry services,” asks Anup Pai, who co-founded eSamudaay. 

And it’s not about the big businesses

An immediate response to such innovation is that large food chains cannot do without delivery agents. Most restaurants say that between 15-25% of their daily volumes are fulfilled by these agents. However, there are others in the smaller towns who prefer not to list on Swiggy and Zomato for purely monetary reasons. 

The ET Prime article also quotes restaurant owner Aseem Grover of Big Chill Cafe located in the Delhi NCR region to suggest two specific reasons for staying off the delivery apps. The first is the overall costs that includes 40% of the sale to ensure better visibility and the second is they refuse to share customer data with the restaurants. 

And these are the two specific factors that the likes of eSamudaay are solving. They have no problem in providing data to those on the app. In fact, the very premise of their business is to decentralize digital or set up data centers locally so that the link between customers and the business owner is retained in its entire pristine state. “This is the Indian way of doing business and has been so for centuries. We insist on keeping relationships transparent,” says Pai. 

Interdependence gone wrong? 

While the likes of Swiggy and Zomato came into existence as a means to connect customers with services, the need to scale their business and grow margins appears to have resulted in the current deadlock. And, nothing can make it more apparent than the case filed with the Competition Commission of India (CCI) by the National Restaurant Association of India against Swiggy and Zomato alleging anti-competitive practices. 

The NRAI petition wanted to define the market for these delivery agents as a “restaurant marketplace with delivery services in various hyperlocal areas across India” which gave them an undue advantage in terms of market clout. The CCI refused to accept and said Swiggy and Zomato are online food-delivery platforms that function as digital intermediaries. 

The irony of this is that Swiggy and Zomato often use Dunzo and others of its ilk to fulfill orders during peak times as well as in locations where they themselves aren’t as strong. Which is why Swiggy invested recently in the mobility platform Rapido so their bike-taxi rider base could also serve as their delivery agents. 

In fact, the CCI needs to view the anti-competition bit more seriously as the payments collected by these services is tantamount to bundling them with their listing services as well. Which means users get to see what Swiggy and Zomato want them to see, and not all the really good eateries in one’s locality. So much for encouraging competition! 

CCI’s claims that such bundling of services is in user interest appears farcical as seen from the experience of our soldier. “These services are for those who can afford it, which is a small percentage of our population,” says the soldier succinctly and is at a loss to explain why maintaining delivery standards is proving to be so expensive where software is doing the trick in a repetitive fashion. “This is just big companies making big money at our expense,” he says. 

Better late than never

Maybe the delivery companies themselves do realize that they might have made enough hay as the sun shone over the past few years. Zomato recently came out with their pilot program for self-delivery by restaurants, provided they “met with the requisite technological and logistical abilities to undertake deliveries themselves in an effective manner.” And Swiggy is following suit. 

However, the wording of the sentence makes it clear that most of the restaurants listed on their app in a particular area would not fall in the self delivery purview. Which is once again where the likes of eSamudaay can provide support. A simple white label solution is made available to a digital entrepreneur who helps restaurants get their menus on the app and relies on their own captive clientele to order first for home delivery. 

Of course, there are the likes of Google-backed DotPe that has partnered with restaurants and cloud kitchens. It helps restaurants set up an online presence, offer chatbots on platforms such as WhatsApp, provide digital payment solutions and aggregate logistic partners and overall order management. Then there is Thrive Now, which charges restaurants 3% commission for an order compared to 25-30% by Swiggy and Zomato. 

Suffice to say that the going will get tougher as both the customer and the small restaurant owner recognize the higher costs that a Dal Khichdi is costing them. It’s only a matter of time that newer solutions would emerge to resolve an age-old problem. 

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