Zomato, Swiggy May Adversely Impact Restaurant Industry: NRAI

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Zomato and Swiggy looking to get a firm foothold in the dine-in business after squeezing the last drop of revenue from the delivery business: NRAI in an advisory to its members

As more people change payment habits to the lure of discounts, Zomato’s and Swiggy’s terms of engagement with the restaurants will change unilaterally: NRAI

While competing payment gateways charge 1-1.5%, restaurants will end up paying 4%-12% to Zomato and Swiggy where there is no commission on dine-in revenues: NRAI

Industry body National Restaurants Association of India (NRAI) has come out all guns blazing against foodtech giants Zomato and Swiggy over their new offerings. 

In an advisory, NRAI urged all its partner restaurants to make an ‘informed decision’ on Zomato Pay and Swiggy Diner, which the body said could also ‘adversely impact’ the overall restaurant industry in the long run. 

Zomato Pay allows partner restaurants to target engagement by way of offering discounts and promotion directly to customers via the app. It also offers a payment service catering directly to users accessing the app. On the other hand, Swiggy Diner allows users to book tables at restaurants at ‘discounted prices’.

“NRAI firmly believes that it is its inherent responsibility to appraise its members on the finer nuances of these large-scale programs and products as they not only impact the economic well-being of restaurants but also can adversely impact the overall restaurant ecosystem in the long run,” the industry body said in the advisory to its members.

Calling Zomato and Swiggy ‘middlemen’, NRAI claimed that the food delivery companies were looking to get a ‘firm foothold’ in the dine-in business after squeezing the ‘last drop of revenue’ from the delivery business. 

NRAI further alleged that the restaurants would be forced to foot the ‘exorbitant’ costs of discounts and high commissions, all while the foodtech players onboard the restaurants’ dine-in customers.

“As more and more people change their payment habits to the lure of discounts and cashbacks, their terms of engagement with the restaurants will change unilaterally…,” said NRAI. 

“After being denied ownership of essential data of restaurant’s delivery customers, this will now open the flood gates for middlemen to colonise dine-in data,” it added. 

The Bone Of Contention

NRAI said that the restaurants would have to compulsorily offer discounts in the range of 15%-40% for customers choosing to settle their payments via the companies’ gateways. 

It also lashed out at the two giants over the new dine-in offerings under which restaurants also have to pay a commission in the range of 4%-12% to deploy Zomato’s and Swiggy’s payment gateways at their premises. 

“While competing payment gateway charges are 1-1.5%, restaurants will end up paying 4% to 12% in time where there is no commission on dine-in revenues,” it said.

Another point of contention for the restaurateurs appears to be weekly payouts. Restaurants processing large volumes may see their payments stuck with the foodtech players for weeks on end and could decrease the liquidity available with the restaurants.

NRAI also lashed out at the companies over the contention that the restaurants are bound to offer discounts to anyone who wishes to pay via the Zomato Pay or Swiggy Diner even if the customer just walked in against discovering the premises on the respective apps. 

Zomato Gold Comes Full Circle?

The standoff is reminiscent of a similar row that had erupted in 2019. While Zomato launched its Gold membership programme in 2017, restaurants fed up with the model decided to ‘Logout’ of the initiative spelling the doom for the dine-in programme. 

Under Zomato Gold, the foodtech player connected purportedly high-spending ‘premium’ users to a curated set of restaurants offering the former hefty discounts. The restaurants were lured with the promise of ‘premium’ customers who would increase high-value transactions. 

However, NRAI claimed that the subscription was sold to millions of people, diluting the ‘brand value’ of the restaurants. 

The industry body also said that Zomato Pay and Swiggy Diner were the two companies’ response to resuscitate the ‘Zomato Gold’ subscription to ‘widen the pie’.

It also slammed them for charging heavy per-transaction commissions for deliveries, adding that the two platforms were using their expansion into dine-in space to further increase their revenues. 

The Indian food delivery market is largely a duopoly, with both Zomato and its rival Swiggy together holding 90-95% of the total market share. According to Statista, the online food delivery segment is projected to notch revenue of up to $12.14 Bn in 2022, with numbers estimated to reach $20.27 Bn by 2027.

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