SUMMARY
Restaurants are offering products on food delivery platforms at higher prices
Online food delivery users stood at over 182 Mn in 2019
Zomato and Swiggy are still running in huge losses
Discounts have remained the key drivers of all consumer-facing internet businesses, including food aggregating platforms. In a bid to remain competitive in the burgeoning online food industry, not just food aggregators but also the restaurant partners are following a variable discounting approach.
While food aggregators such as Zomato and Swiggy are still running in huge losses restaurants are now looking to hedge their bets to remain sustainable even after reducing the prices of their offerings and providing commissions to online platforms. Restaurants have achieved this by increasing the pricing of their products online and then providing a heavy discount on it, Swiggy confirmed
Responding to a tweet, which has raised a similar concern, Swiggy said that while it is trying to maintain transparency its services, it has no control on the different online and offline prices of restaurant’s food products. “The prices might be different for online and offline as it is the sole discretion of the restaurant without any added input from our end,” the company added.
A user of these food delivery platforms, on Twitter, had highlighted that prices of food items over Zomato or Swiggy are 25 to 50% more than the actual price of the same at the restaurant.
Hi Raju, we understand your concern, and would like to inform you that we're trying to maintain transparency in our services & that extends to the pricing on the platform. However, the prices might be different online & offline as it is (cont) https://t.co/q3gmXjFAwA
— Swiggy Cares (@SwiggyCares) January 20, 2020
Speaking to Inc42, Madhav Kasturia, owner of Beijing Street, a Delhi-based restaurant chain and a partner of both Zomato and Swiggy, confirmed that it is the restaurant owners who indulge in these practices to lure customers. “These restaurants increase their prices on online platforms by themselves and companies like Zomato and Swiggy have no role to play in this,” he added.
While these companies did not ask restaurant partners to keep prices same for offline and online orders, Kasturia said that both Zomato and Swiggy urge them to maintain parity on pricing on all online platforms.
Another Gurugram-based restaurant partner on condition of anonymity said that restaurants increase their prices by 30-50% and then offer the same discount on these products to increase the number of orders.
DataLabs by Inc42 noted that as of 2019, the total online food delivery users stood at 182 Mn+, growing at a rate of 12% (2018 to 2023). With Zomato acquiring UberEats on Tuesday (January 21), India’s food delivery space has now become a duopoly, which is dominated by Swiggy and Zomato. Zomato had acquired UberEats’ food delivery business in India for $350 Mn.
After this acquisition, UberEats’ will continue to remain a separate brand. However, customers will be automatically redirected to Zomato, giving the Indian food aggregator access to almost 50-55% of the market.
Another notable player in this space is the Bengaluru-based Ola Foods, which has recently solidified its foodtech strategy with the announcement of Ola Foods Khichdi Experiment and other upcoming food brands.
