Domino's Prepares To Join Government's ONDC Network

Pizza chain operator Jubilant FoodWorks Ltd. is in the process of launching Domino's on the government’s Open Network for Digital Commerce platform.

"We are organising ourselves to launch it [Domino's] on ONDC," Sameer Batra, president and chief business officer at Jubilant FoodWorks, told analysts in a post-earnings conference call. "Wherever customers are, we want to serve them with Domino's Pizza," he said. Its teams are currently assessing the technology and integration aspects, he said.

The duopoly of Swiggy and Zomato Ltd. in the food delivery space is showing signs of being challenged. Post-pandemic, the restaurant industry had been trying to push customers into direct ordering. And now, they are banking on the ONDC platform to fight higher commissions charged by aggregators. Currently, the aggregators charge platform commissions that can go up to 30%, while the same on the new network is 5-6%.

In recent times, with players like Zomato-backed Magicpin integrating with ONDC, thousands of restaurants have joined the new network. Other key food players such as McDonald’s, Biryani Blues, and Wow! Momo, among others, has already onboarded or is in the process of doing so.

The price difference between food items on ONDC and those on platforms like Swiggy or Zomato has been found to be as high as 30–60%.

Large discounts propelled ONDC's daily orders to jump 2.5 times to 25,000 last week. Discounting, however, is just a short-term strategy to onboard participants onto the new platforms, according to ONDC's Chief T. Koshy.

The lower commissions on the network, he said, will translate into low prices for buyers as restaurants pass on the savings to customers.

However, ONDC is a strong public good along the lines of UPI but one that faces 'real-world' issues, according to analysts of various brokerage firms.

Several of them have highlighted that the players on the ONDC network may not be able to sustain higher discounts if incentives from ONDC cease. The current incentives include direct discounts of Rs 50 per order for customers, but are restricted to three orders per user each day and up to 2,000 orders per day per buyer app.

"On the face of it, lower prices make ONDC compelling. However, this does not seem to be based on the principle of inefficiency elimination, but on the fair amount of subsidy (up to Rs 125 per order) that ONDC offers," according to Jefferies.

Once ONDC withdraws the incentive scheme, either the restaurants or the customers will have to pay for delivery. If ONDC decides to absorb the bulk of delivery costs, they will have to charge higher commissions from restaurants, resulting in higher listing prices and impacting order volume.

ONDC also does not maintain large delivery fleets like its competitors. Instead, it relies on third-party delivery platforms like Shadowfax for deliveries, which eliminates the operational costs of managing and growing a fleet. Domino's, in this case, has the upper hand because it has always done its own pizza deliveries—even for orders that are placed on the food aggregator apps—with a promised timeline of 30 minutes.