WHY ZOMATO’S AND SWIGGY’S HIGH COMMISSION JUSTIFIED?
During the recent pandemic situation, the rise in online delivery systems reached its peak. The post-pandemic scenario made the shut-ins come out for a dine-in. though restaurants are opened with utmost safety and hygiene people as usual wish to order and eat at home. Online delivery platforms like Zomato and Swiggy are riding on the wave by giving the best food delivery services. Offer, discounts, special events and a lot more to attract more and more customers. Not to mention many recent concepts like cloud kitchens and several start-ups formed in between this one year gap and are now in the arena of tough competition. Once a new startup pops out it experiences overwhelming competition by the top companies and also its runner ups. Due to these intermediaries, the original foodservice providers had to take a heavy loss even to sustain.
So what is this commission thing? A commission is a service charge by the providers like online food ordering platforms. They provide a web-based interface for the users to order food from and hence they are called the aggregators who provide this platform. In order to use them, restaurants and food centres have to pay a certain amount from the income as a client for handling purchases and securities for the customers. These aggregators are the intermediaries who control the interaction and almost everything between a restaurant and the customers. Before this scene actually came, restaurants did the advertising wholly physically by distributing catalogues and fliers. Customers had fixed up their favourite ones and also visit others to taste theirs. It was a happy moment for the restaurants even though competition still existed. And about the food delivering part, calling the restaurant directly availing discounts directly from them was justified by most of the restaurants. Not now though. Most of the restaurants are now online even if they are working physically outside. The urge to buy online items has increased ever since the world faced this deadly pandemic. Now the restaurants don’t have anyone as a particular customer but as an order number from a particular address. The reasons behind these are the online mediators to control the central string that connects both restaurants and customers directly. There is a recent upsurge that these online platforms charge a high commission to the restaurants. At most Zomato and Swiggy charge 25-30% on the order value from the partner restaurants which is gradually increasing over years. There are certain industry average charging and these platform charges higher than that considering the order, time and distance. Not only this, the packaging fees and convenience fees are also considered and that too is relatively higher than the average.
Such are the reasons why restaurants are persistently pressing these food delivery platforms to change the structure of their charging commissions. Forced discounts and high charging makes it hard for the dine-in restaurants to meet their operation and other costs. If we include cloud kitchens in the fray things are worse there. Since walk-in restaurants have food delivery service as their side business, cloud kitchens solely focus on that. And using these platforms makes it harder for them. it is assumed that if these online platforms reduce their commissions at a lower per cent value, the restaurants can help remain in their current position. Because of all these, the trend of #OrderDirect is taking up the heat and this is not any anti aggregator movement against any industry.
Now, why is this commission thing justified? Restaurants are against it but online platforms support it. It’s said that they have introduced this to sustain every stakeholder and their growth including their partner restaurants. As per the TOI report, a Zomato spokesperson said that they continuously reducing discounts in order to benefit the restaurants. And as per another TOI report, these platforms are going to focus more on food delivery rather than groceries. Moreover, Zomato and Swiggy provide a good exposer to the restaurants on the internet and it equals good digital marketing. According to the current Zomato site, it says that they are launching zero commission for food ordering in India. And the company has become profitable due to core advertisement in Southeast Asia and the Middle East, enough to cover millions of dollars of investments. To mark this occasion there making zero commission to all their partner restaurants if and only if they pass the quality-based criteria. Criteria include a lot of points like number of orders, happy customers, service quality etc. The direct order trend due to high commission by Swiggy and Zoamto is generally taken up by big restaurants and it’s still advisable for small restaurants to be on these platforms. These commissions seem justifiable when you consider facts like a more noticeable presence on the internet and easy customer reachability. Keeping all the facts including that a restaurant finds it hard to do digital marketing alone and carry one food delivery on its own, the high commission doesn’t look like a bad deal.