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-By Niharika Naik (email@example.com)
Ordering online via a food delivery application like Swiggy and Zomato or dining at your favourite restaurant for a memorable occasion is a personal choice. Or is it? If you are unwilling to hurt your pocket, which of these two choices should you make?
The harsh reality of the COVID-19 epidemic brought the food industry to its knees. Food services were one of the worst hit sectors during the coronavirus outbreak. However, once lockdown was lifted around India, the importance of staying at home and remaining scarce was on an all time high. Recent surveys cited 81% of consumers who order food online do so for the sake of convenience. Moreover, projected statistics mention food delivery revenue growth to multiply about 21.78% annually until 2027.
The delivery market’s largest segment includes daily grocery doorstep deliveries greatly preferred due to the time saved, convenience, and ease. Delivery applications like Swiggy and Zomato have a previously coded, built in delivery system and management for a hassle-free experience. Delivery services weave in marketing and promotional opportunities for a steady customer return rate and customer satisfaction. Is the reality of food delivery applications all that meets the eye? Timely speculation concerning delivery services and their relationship with restaurants resulted in a probe revealing discounts applications have to offer.
While customer experiences tend to be largely positive, restaurants and hotels linked to the likes of Swiggy and Zomato suffer high commision charges. Zomato and Swiggy charge restaurants an exorbitant 24% – 28% of their total order value. The aforementioned commissions include business generation for partner eateries and exclude the fee for seamless deliveries. Additional payouts are made to delivery applications by the restaurant for discoverability to appear in top consumer searches.
“I believe the current delivery platform average order value is at Rs. 400. Restaurants with a higher AOV are able to demand lower commissions from delivery applications while restaurants with lower AOVs are unable to do so. Has inflation and the global slowdown due to uncertainty of war affected consumption? That remains to be seen,” remarked Mr. Kabir Suri, President, National Restaurant Association of India (NRAI).
Restaurants face issues of capital and labour intensive environments. Dining houses brainstorm the preservation of perishable goods, high competition just around the corner, and stress of breaking-even in light of soaring real estate costs. Restaurants are cornered into increasing delicacy and meal prices to avoid paying delivery application commissions.
Local level authorities are trying their best to mitigate uneven distribution of profits in the hospitality industry. “We have partnered with WAAYU – a zero-commission food delivery application which allows restaurants to competitively price dishes, dividing its savings among customers,” said Mr. Sukesh Shetty, President of Indian Hotel and Restaurant Association (AHAR). “Cloud kitchen models are entirely dependent on Swiggy and Zomato for aggregators like marketing tools and social presence while traditional models have a priorly built customer base. Food delivery services are creating their own culture. Initiatives like Open Network for Digital Commerce (ONDC) are welcome changes to make processes seamless and inclusive,” he remarked.
Swiggy’s current policy charges a maximum fee of Rs. 2 regardless of cart value. Rs. 2 may seem like a meagre amount but research suggests Swiggy dispatches about 1.5 million orders daily. The 2-rupee-per-cart principle allows Swiggy to effortlessly reinvest back into its own business.
A surge in home delivery practices resulted in customers flagging quality control issues. Individual Swiggy and Zomato users have highlighted concerns of poor packaging and food that misses the mark in terms of taste. Few local eateries, restaurants and cafes go out of their way to add distinctive, high-recall elements to home delivered orders. However, the question remains… Can food delivery services, however convenient, compete with an overall dining experience coupled with exclusive chef interactions and secret recipe discoveries? Ordering directly from the restaurant and hotel owners investing in a customised application catering to needs of their establishment are possible solutions. Designing a tailor made app means no extra fee, no hassle, and no branding surveillance.
“The relationship between food delivery applications and restaurants is lopsided and unviable. Earlier, takeaway orders were 10% of total revenue which has now increased to 20% or more. Educating people to order directly from restaurants in exchange for discounts is a possible pathway. Constant consumer engagement and increasing complaints filed against food delivery services will bring a semblance of normalcy in the process,” Mr. Pradeep Shetty, President of Hotel and Restaurant Association of Western India (HRAWI), told Kitchen Herald.
“Restaurants need to deliver their products themselves. There was a time (when) Swiggy and Zomato did not exist. Delivery charges are not the issue. Loyal customers have now become brand customers. Once restaurants incur their own costs, restaurateurs will no longer be exploited and old business profit will not be killed,” stated Sanat Relia, Vice President of Southern Gujarat Hotel and Restaurant Association (SHARA).