Will Zomato Move To Zero Commission Model For Restaurants?

SUMMARY

There have been murmurs of Zomato and Swiggy looking to change their fee structures for restaurants in the aftermath of ride-hailing major Rapido entering the food delivery market

Rapido has scaled up its food delivery business in several Indian cities, intensifying competition for established players like Zomato and Swiggy

The main moat of Rapido’s Ownly is its zero commission business model for restaurants, a page out of the company’s ride-hailing playbook

Food delivery major Zomato’s parent Eternal is said to be weighing alterations to its commission models and has begun discussions with restaurants across the country.

As per an NDTV Profit report, the foodtech major is said to be gathering feedback from restaurant partners, but no definitive plan has been finalised on any changes to the commission structure.

However, restaurant partners that Inc42 spoke to in Bengaluru and Delhi denied receiving any such update from the food delivery platform on the changes in commissions. “This is not true,” said a Zomato spokesperson while responding to Inc42’s queries.

However, there have been murmurs of Zomato and Swiggy looking to change their fee structures for restaurants in the aftermath of ride-hailing major Rapido entering the food delivery market with its offering “Ownly”.

Rapido, which previously focused on bike taxi and logistics services, has scaled up its food delivery business in several Indian cities, intensifying competition for established players like Zomato and Swiggy.

The main moat of Ownly is its commission free business model, a page out of Rapido’s ride-hailing playbook. As per its launch note to restaurants, Ownly currently charges a flat commission fee of INR 25 per order, plus GST, from the food outlets.

Further, as per Ownly’s terms and conditions, food deliveries will either be facilitated by Ownly through a third-party or the restaurant partner directly. “In both these cases, we are merely acting as an intermediary between you and the delivery partners, or you and the restaurant partner, as the case may be,” the app says.

This is in contrast with Zomato and Swiggy, which take 25%-35% commission per order from the restaurants. In addition, there are other fees such as rain collection fee and long-distance fee as well.

Notably, the changes to commission models could potentially impact restaurant margins and influence market share among aggregators. As of now, the original report claims that Zomato is gathering feedback and conducting talks with its network but has not implemented any new fee structure.

It is pertinent to note however that Rapido is not the first ride-hailing company to test waters in India’s foodtech space. Ola has made several attempts over the years, starting with Ola Cafe in 2015, followed by the acquisition of Foodpanda India in 2017, both of which were eventually shut down.

Uber too entered the market with Uber Eats in 2017, but exited in 2020 after selling the business to Zomato. The likes of Paytm and magicpin have also made some inroads into this space thanks to their partnership with ONDC.