It wants to wipe out its competition in India once and for all.
A week after breaking even in six markets across the globe, online restaurant search, rating and food ordering company Zomato wants to stop charging commission from restaurants covered by it.
This would apply to orders generated from the platform as well as for providing last-mile delivery services. The move, would help the firm wipe out the remaining competition once and for all according to Pankaj Chaddah, co-founder, Zomato.
However, analysts and rivals questioned the zero commission model and wondered if Zomato could meet its operational profitability target for the year. The firm currently charges 10-15% commission per order. The commission is charged according to the rating of the restaurant. If the rating is high, the commission is less and vice-versa.
Explaining the logic behind the zero percent commission for its 12,000-odd restaurants on the Indian platform Chaddah said, “We have broken even in India and five other countries. Now we want to wipe out the competition. While others are pushing their merchants to increase the commission, we will do the opposite, which will eventually lead to all these restaurants abandoning other portals.”
According to the firm, online order and delivery is only 4% of its total revenue and the rest is from search, advertisements and its ‘white label’ platform – a suite of technologies for restaurants to run their business on the Internet.
He added while Zomato’s competitors charged low commissions initially to add more restaurants to their portfolio, now with most of these companies bleeding, they are now demanding higher commission. In terms of value of orders, it claims to be the market leader, but not in volume terms.
While Bengaluru-based Swiggy is giving competition to the firm now, Foodpanda has been a leading player in the space. According to reports, Rocket Internet-backed Foodpanda was on the block, but its CEO denied it recently.
