Lockdown 2.0: Zomato ends funding of discounts amid Covid-19 outbreak

Restaurants working as parcel services are battling high input prices, lack of packaging material, labour shortages, and limited serviceability due to timing restrictions | Photo: Zomato
Starting Monday, Zomato is withdrawing the funding of merchant discounts (sharing discounts offered by its restaurant partners) as it seeks to cut losses in a competitive food-delivery market. The move signals the end of hefty discounts for customers, on the one hand, and adds to the woes of the beleaguered restaurant industry, on the other.

Amid the viral outbreak, the rationale behind the move is safety for its customers and restaurant partners, and its own survival, said a spokesperson for Zomato.

“Discounts drive impulse purchases, and we want to serve only the most essential food-delivery orders now — for our customers’ and our delivery partners’ safety.” “Whether restaurants directly offer discounts on the Zomato platform or not has always been and will remain their own choice. We can only decide things for ourselves as a marketplace,” she added.

Restaurant partners, battling for survival amid the lockdown, view it as coercive tactics by Zomato. “When restaurants open, they will be desperate and will pay on their own to win back business,” said the owner of a Mumbai-based restaurant.

Pravin Rungta, president, Mumbai chapter, National Restaurant Association of India (NRAI), said: “For aggregators it’s a valuation game, but for us it’s business.”

When discounts started, the ratio was 90:10 (90 per cent was borne by the aggregators). “Restaurants that have been shut for more than 45 days will be desperate for business and may offer unreasonable discounts, but till when?” asked Rungta.

Jimmy Shaw, MD, The Waterfront Shaw, Lavasa (Bona Sera Hotels), said: “Our hoteliers believed that online aggregators were helping us to drive business but in the long term they have only increased our cost.”

Restaurants working as parcel services are battling high input prices, lack of packaging material, labour crunch, and limited serviceability. “The customer will be the biggest loser. With Zomato’s funding gone and costs up by 200 per cent, restaurants have no option but to do away with discounts or raise menu prices,” a restaurant owner doing business with Zomato said.

Offers now will be fully funded by merchants with a maximum discount of Rs 80 and a maximum discount percentile at 40 per cent.

While Swiggy stopped merchant funding as early as June last year, it has been compensating the merchants with better visibility on its app.

Unlike Swiggy, under Zomato’s new move, merchants who end up funding discounts won’t get any freebies in terms of visibility or preference.

Withdrawing merchant funding is ill-timed, said Dayanand Shetty, a Mumbai hotelier.

“Much like other Covid warriors, some of our brave hoteliers are offering parcel service to support people during the lockdown,” said Shetty, adding that Zomato’s role at this point of time should be to support them.

The Association of Hotels and Restaurants, The Federation of Hotel & Restaurant Associations of India, and the NRAI will sit together after the lockdown and take a decision on discounts and what hoteliers should do, said Shetty.


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