Zomato, Swiggy face the ire of partners. Time to rethink value proposition?

Heavy discounting has caused heartburn among the restaurant partners of the food tech companies
It is a packed street, a line of bikes has taken over the pavement; stacked up on their seats are large black haversacks, a Zomato or a Swiggy logo leaping out for attention. Next to the bikes, a sea of young men crowd a row of poky dine-outs that are stretching themselves bare to cater to the long list of orders pouring in via the apps. Ask the restaurants and the universal answer is that the number of orders has doubled and even quadrupled for many since they hitched a ride on the aggregator apps. 

Yet, business is wearing thin, forcing many to shut shop. And the growing discontent that this has fuelled has led to a backlash against the two poster boys of food tech, just as it did when hoteliers went up against online travel aggregators (Makemytrip, Oyo) some months back and previously, when partner-drivers raged against Uber and Ola.

Given that the customer has has always been the cornerstone of the digital economy, is it time for the aggregator brands to rethink their promise to their partners—be it restaurants, airlines and hotels and drivers? 

“In any value chain when any one link tries to grab more than its fair share, there is bound to be unhappiness,” says Sandeep Goyal, founder of Mogae Media who believes that the food platforms are trying to monopolise, control and dictate the business.

The Federation of Hotel & Restaurant Associations of India (FHRAI) Vice-President, Gurbaxish Singh Kohli said, “Deep discounts and offers are filling only the pockets of the FSAs (food service aggregators) while restaurants suffer.” The bargain hunt that aggregators have unleashed is killing the industry, he believes. “Our own internal survey has revealed that over 40 per cent of the guests are willing to go to the restaurants that offer best discounts,” he says adding “you can’t blame them. As a consumer, that’s all we would want but this has to be in a way that is a win-win for both the FSAs as well as the restaurants.” 

K V Sridhar, founder and chief creative officer, HyperCollective, says the battle is not new. He compares the situation to that the consumer goods industry underwent when modern retail chains came into force. The retailers went through a similar phase when they took on the big brands over discounts. Finally, retail chains began building their own brands. “Take a look around now, you’ll find over 30 per cent of the products in the retail chains are their own brands selling at cheaper costs,” he says. 

For Sridhar, the present conflict ought to lead to structural changes such as FSAs focusing more on building their own kitchens (cloud kitchens), or investing in few new restaurants to build a nationwide brand, not just on acquiring customers to please their “investors”.  However, this comes with its own set of challenges, he adds. 

Brand strategist and founder of brandbuilding. com, Ambi Parameswaran, says the FSAs have an upper hand in this conflict. “The FSAs are sitting on piles of data and know what consumers want. The restaurants cannot afford to lose out on their listings unless the top restaurants join hands and block out FSAs,” he adds. That might not be a feasible solution. 

Goyal believes that the platforms while only being delivery and payment intermediaries are actually gathering customer data, analysing it, then using the data to promote offers on certain restaurants at the cost of others. Such conduct is not good for business, he adds. Time then for the digital brands to turn their consumer facing apparatus away from the harsh glare of discounts to their partners and ethical practices.  

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