Impact of fury on the delivery portals

According to a copy of the email accessed by The Ken, if the order isn’t marked ‘ready’ at the time of cancellation, Zomato will only compensate 40% of the order value. If already marked as prepared, the restaurant gets a full refund. The same rate of compensation applies if 80% of the estimated delivery time has not elapsed. Beyond this, a restaurant is eligible for full compensation.

For restaurants, it was yet more salt in the wound; the latest salvo in a six-month-long battle they’d fought against restaurant aggregator platforms. Besides Zomato, restaurants are also up against Swiggy, Zomato’s biggest rival, reservation platforms EazyDiner and Dineout, as well as hyperlocal deal aggregators Nearbuy and magicpin.

The heavy discounts

The biggest bone of contention for restaurants was the aggressive discounts facilitated and pushed by these companies. The simmering anger bubbled over in mid-August 2019, with restaurants logging out of Zomato’s subscription product—Gold. Zomato Gold offered members buy-one-get-one on food and buy-two-get-two on drinks at partner restaurants. The programme, as restaurant partners soon found out, was hurting their business. It drew bargain hunters rather than building loyalty and ate into margins.

While Zomato was the primary focus of the campaign—dubbed #Logout—its discount-focused peers soon joined it in the doghouse. (We wrote about this in August) Dineout, which was in the midst of its Great Indian Restaurant Festival (GIRF)—a month-long discount-driven dine-in promotion—also saw restaurants withdrawing.

Five days into the #Logout campaign, as the number of protesting restaurants crossed 2,200, Zomato made 10 changes to the Gold program. These included limiting Gold users to one unlock per day, and allowing a maximum of two unlocks per table. These concessions walked the delicate balance of pacifying restaurants without angering users.

At the time, it seemed like the tide was turning. The food tech Goliaths were brought to the negotiating table by armies of Davids, all rallying behind a common banner. And their numbers gave them confidence. Restaurants weren’t interested in small white flags. Their agitation came down to six major battles that had the potential to change the landscape of the industry.

Six months later, little has changed. Save for in-principle agreements, no big changes have been implemented, according to two members of the National Restaurant Association of India (NRAI). The NRAI’s six-point agenda is still being negotiated between the two parties over the bold print and the fine print. For aggregators, it has been about giving an inch and taking a yard.

Sure, Zomato made changes to its Gold program and called time of death on Infinity Dining (a programme which let users order unlimited food and drinks for a fixed price). In September 2019, however, it extended its Gold programme to cover deliveries as well despite opposition from the NRAI. Today, there are more restaurants listed on Zomato Gold than in August.

As for Dineout’s GIRF, there are more restaurants participating in its ongoing edition than there were during the last one in August, when the logout campaign started. “To be honest, there was no impact from the logout campaign,” Ankit Mehrotra, Dineout’s co-founder and chief executive officer, told The Ken.

Now, restaurant associations like NRAI and the Federation of Hotels and Restaurants Association of India (FHRAI) have banded together to take on aggregators. With their efforts yet to show the results they wanted, they’re turning to regulatory forces like the Competition Commission of India (CCI) or even the Department for Promotion of Industry and Internal Trade (DPIIT) for relief.

Six-shooter fires blanks

Since August, discussions between the NRAI and food tech aggregators have centred around six major issues. These cover practically every aspect of the aggregation business. From the algorithms that power search rankings, to food delivery—the bread-and-butter of the aggregation business.

The primary issue—the match that set off the #Logout powder keg—of course, was deep discounting. While the NRAI acknowledges aggregators need discounts to acquire customers, it stresses that these cannot be in perpetuity. Further, while the upside of these schemes is captured by the aggregators, the downsides are borne by the restaurants. We’ve written about this in an earlier piece.

Service unbundling is another sticking point. Restaurants want the freedom to use platforms like Swiggy or Zomato while retaining the choice to handle delivery on their own. This is particularly sticky for Zomato and Swiggy, considering most of their revenue is from deliveries- nearly all of Swiggy’s revenue and 75% of Zomato’s in the financial year ended March 2019 came from food delivery.