Indian Restaurants Are Building A Rival To Swiggy, Zomato

Indian restaurateurs are looking to take back control from their “digital landlords”, at a time when they need them the most.

A restaurant is seen at the Roseate New Delhi hotel, operated by the Bird Group, in New Delhi. Photographer: Anindito Mukherjee/Bloomberg
A restaurant is seen at the Roseate New Delhi hotel, operated by the Bird Group, in New Delhi. Photographer: Anindito Mukherjee/Bloomberg

India’s restaurateurs are looking to take back control from Zomato and Swiggy when they need them the most.

The National Restaurant Association of India, with more than 50,000 members, said it’s focusing on building an alternative to food delivery apps to reduce dependence on what it calls “digital landlords”. It’s working with a tech platform and logistics service providers to allow restaurants to take orders through social media sites such as WhatsApp, like China’s super app WeChat.

“We’re trying to get control of the ecosystem back into our hands which has moved completely to the aggregators,” Anurag Katriar, president of NRAI, told BloombergQuint over the phone.

That comes when home delivery is the only way to cushion business during the Covid-19 pandemic. Indians are unlikely to flock outside to eat even though the government allowed food outlets to reopen from June 8 with restrictions. Many restaurants will struggle to survive after remaining shut for more than two months. But the pushback against the apps was brewing.

Indian restaurants were quick to sign up with delivery companies as a surge in smartphone penetration and cheap data fueled online ordering. The promise was simple—get new customers and data insights to improve business in a market Redseer expects to quadruple to $2.5 billion by 2021.

But then the apps, after a period of consolidation that saw about a dozen operators fold up, started charging up to 25% of the order value, eating into margins of food outlets. The first indication of a rebellion was last year’s #LogOut campaign aimed at Zomato. And the faceoff comes when Amazon is expected to shake things up with its entry even as delivery apps continue to report losses.

The restaurant lobby is now looking to partner with about eight third-party delivery firms, including Shadowfax, while keeping a check on discounting. Katriar, while declining to comment on partners, expects the platform to go live in six weeks. The fee, he said, will be per transaction and lower, not as a percentage of the bill.

A waiter takes an order from customers at the Indian Coffee House in Kochi. Photographer: Dhiraj Singh/Bloomberg
A waiter takes an order from customers at the Indian Coffee House in Kochi. Photographer: Dhiraj Singh/Bloomberg

According to Pranav Rungta, owner of Café Royal, Headquarter and Tamak restaurants in Mumbai, and cloud kitchens Curry Me Up and Chow Me Up, the technology integration will take care of payments and logistics.

The idea is to use social media services such as WhatsApp, Instagram and even Google’s social search for orders, he said. “Think of it as social ordering,” he said. “At the moment, Facebook and Instagram marketplaces have emerged, and we want to use them to simplify food ordering.”

Rungta’s restaurant beta-tested the delivery service but he declined to share details.

As delivery becomes a key source of business, paying high commissions and discounting is not feasible, he said. “We don’t want to go on a war with them [delivery apps] and wanted to coexist from day one,” Rungta said. “We have been initiating dialogue since the logout movement but there has been no response. They seem to be in a position where they think they can rule the industry.”

Zomato didn’t respond to BloombergQuint’s emailed queries. Swiggy said in an emailed response that commissions, worked upon with individual restaurants, are in line with factors like average order value, delivery and other costs. Swiggy, it said, aims to assist restaurants grow their business and right now the focus is on helping restaurants “reopen seamlessly” and improve cash flows.

‘Bleeding Each Other Out’

For restaurants, getting listed on the applications means sharing a percentage on each order. Rungta said the commission is in the range of 18-25%.

The apps also charge for marketing and decide the discounts, which are borne by the food outlets. Restaurateurs can’t renegotiate and end up losing more on higher ticket sized-orders, Rungta said. This comes on top of other costs on labour and food, leaving us with almost no margin, he said.

Restaurants have had no choice. The dominance the apps enjoy makes it impossible for anyone to venture into the delivery service, according to restaurant operators. More than 80% of orders come from them, Thomas Fenn, founder of Mahabelly restaurant in Delhi, told BloombergQuint over the phone. “So not to be on these apps hasn’t been an option to the restaurateurs.”

“In the world of food delivery, it’s increasingly difficult to figure out who’s really winning, and who it’s serving” Fenn said. He would have backed this model if it worked for at least anyone. “Restaurants are losing money; these apps are hemorrhaging money to bleed each other out.”

The race to get more users has prompted apps to set up own cloud kitchens where restaurant owners or chefs can rent space or start a new business. Apart from that, Swiggy has its own ‘The Bowl Company’, pitting it against its own partner outlets.

A food delivery rider for Zomato rides a motorcycle in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
A food delivery rider for Zomato rides a motorcycle in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

The new ordering platform by the restaurant lobby is its second digital offering to take on delivery apps after it partnered with the Dotpe for QR code-based menus. The service also allows restaurants to connect with customers directly via WhatsApp, like Zomato’s contactless dining platform.

The Dotpe platform already has 2,500 restaurant partners, Anurag Gupta, co-founder of the firm, said. It charges Rs 2 per delivery, the NRAI said.

The food service industry’s anger against delivery apps is not limited to India. Globally restaurateurs are questioning the practices of aggregators such as DoorDash and Grubhub in the U.S., and Deliveroo in Europe.

“Many such initiatives are seen in other sectors where there’s a threat to businesses from app aggregators,” Arvind Singhal, chairman and managing director of Technopak Advisors, said. While it’s not easy to build a new platform, it can provide some control on discounts and data sharing, he said.

‘Easier Said Than Done’

Still, restaurants’ reliance on delivery apps is only going to increase as demand for home delivery spikes during and after the coronavirus lockdown. Many five-star hotels and premium chains, including Massive Restaurants that didn’t take orders online earlier, are now considering it as dine-in sales have collapsed.

Dumping the apps is easier said than done, Satish Meena, forecast analyst at Forrester Research, said. The bigger problem, he said, is that customer experience might suffer, and that’s what Swiggy and Zomato have tried to solve. “There are a lot of unknowns involved at the moment.”

Meena said ultimately it’s about the ownership and whether they’ll be able to maintain quality. If the new platform scales up as they have planned, it might give restaurants some negotiating power but don’t expect it to be an alternative, he said, adding that technology isn’t the problem but logistics and discoverability are.

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NRAI’s Katriar said they understand the challenges and are working with their technology partner before the final launch. He declined to name the partner.

Rungta, too, acknowledged the hurdles but sees this as a beginning.

“The user is very much used to Swiggy and Zomato, so it will take some time to change that habit. Today we don’t have an option, so we’re also dependent on the apps as well; once we have it, we won’t be,” he said. “Even if we get 5-7% migration to begin with, it will be a massive win for us.”