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Delivery disruption: Restaurants forced to serve differently



Many launch an #OrderDirect campaign as an alternative model to food aggregators. But is it really feasible?

This is a battle that has been on for nearly three years now. Back in 2019, restaurants and food tech aggregators like Zomato, Swiggy and Dine-Out clashed over the latter’s high rates of commission. Then it was mostly small skirmishes and restricted to a few players. However, now it is a full-fledged war, with the National Restaurant Association of India (NRAI) sounding the battle cry.

The reason is that the dine-in model has all but collapsed due to the pandemic and repeated lockdowns, and delivery is the only route to survival for restaurateurs. But the high commissions charged by aggregators is making it hard for restaurants to stay afloat. Hence many members are heeding NRAI’s call to go direct.

As Krishna Gupta, Managing Director of 1441 Pizzeria, says, “The margins in the food business are razor-thin and, in the current situation, paying aggregators those heavy margins is just not feasible.”

NRAI, which had been negotiating hard with the aggregators, has now begun stressing on the need to develop in-house delivery capabilities among its members. Last week it ran a series of bootcamps to help restaurant players develop own ordering channels using neutral platforms such as DotPe and Thrive, and woo consumers to order directly. Indeed, social media is now full of emotive appeals from restaurants to order directly from them — and it seems to be striking a chord with customers who don’t wish to see their favourite neighbourhood joints close down.

As Chef Nikhil Jain, founder of Coppeto Artisan Gelato, points out, “The amount of money we have lost is significant.”

At the bootcamp, Riyaaz Amlani, CEO and MD, Impresario Entertainment & Hospitality Pvt Ltd, one of the most vocal voices about creating an alternative delivery model, pointed out that commissions and discounts charged by aggregators have been growing to 40-42 per cent and, hence, direct delivery capabilities are crucial.

What NRAI says is true, but how feasible is it for restaurateurs to build direct delivery capability? How many can pull it off?

Platefuls of challenges

Mohit Bulchandani, Founder, Seeds of Life, Bandra, admits there are many challenges. “The first and foremost is being able to break through the order-placing patterns of consumers, who have become extremely comfortable with ordering from delivery/third-party apps, “ he says.

He also says it’s time-consuming to create own delivery channels. “From identifying and tying up with direct ordering channels, getting people to know about the same, to actually getting orders — it is quite strenuous,” he admits. Seeds of Life, however, decided to create a delivery model, taking end-to-end responsibility.

For Gupta of 1441 Pizzeria, which developed its own app and website for direct ordering, the real challenge lies in the last mile. “We cannot invest in having a fleet of riders, especially at the salaries that aggregators pay,” he says. While ensuring better margins, direct ordering however does not allow control over the final delivery, often hampering customer experience and impacting the business, he adds.

He points out that aggregators have portals with high-end back-end systems to provide seamless customer experience. “It has taken a lot of effort and investment to optimise our back-end systems to give customers a good experience and allow us to utilise data to our advantage.”

Sweet rewards

Apart from the rates, the tussle between restaurants and aggregrators was over data sharing. Aggregators sit on a goldmine of personalised data on consumer preferences, which they refuse to share.

“This is where we suffered the most, as it is like shooting in the dark with ad spends, offers, etc. Going direct seems arduous in the short term, but it is a step in the right direction for the entire industry,” Gupta argues.

Now they have ownership of data and can use it to their gain.

The other trump card aggregators hold relates to “discovery”. Your little restaurant can be discovered by millions of consumers at the click of a button on an aggregator platform.

Samir Kuckreja, founder and CEO of food consultancy Tasanaya Hospitality and past president of NRAI, mentions an ice cream brand called Cold Love that has invested in digital marketing to become discoverable. Earlier, 80 per cent of the business was through Zomato and Swiggy, and only 20 per cent direct, he says. Now it gets 80 per cent direct. “The digital marketing spend of Cold Love is lower than the commissions paid to aggregators,” he says.

Direct delivery technology also gives restaurateurs the freedom to cater to consumers beyond the radius defined by aggregators.

The annual food service market is pegged at ₹4.2 lakh crore and expected to grow to ₹7.7 lakh crore by 2025. The “delivery” portion is pegged at ₹37,000 crore, with e-commerce aggregators accounting for ₹25,000 crore, according to NRAI.

But, of course, there are many who don’t want to break off totally with the aggregators. Kuckreja says several brands he consults with are dropping one aggregator, but staying on another platform for the sake of customer acquisition. You could do multiple things with the customer who comes via the aggregator — offer them a discount coupon for direct orders, he says.

At an NRAI townhall, Pratik Pota, CEO and Wholetime Director, Jubilant Foodworks Ltd, which operates various restaurant brands including Domino’s Pizza and Dunkin Donuts, admitted that customer acquisition is a key reason to stay with aggregators.

“Aggregators serve a very important consumer need which includes experimentation, search, discovery and fulfilment. Our focus remains very sharply on new customer acquisition by partnering with them. However, even as we do that we ensure that we invest in strengthening our own home delivery infrastructure and app.” Domino’s Pizza ensures it has control over the last-mile delivery, he added.

Domino’s Pizza has the muscle to get customers to migrate to its channels. But many smaller players don’t.

Significantly, when we reached out to Zomato for this story, it declined to comment as it was in discussions with restaurateurs.

Will there be some resolution? Kuckreja says that Zomato and Swiggy currently operate in a duopoly and so hold all the aces. But he points out that Amazon is slowly making inroads into the food delivery segment in Bengaluru, and its commissions are lower. Once Amazon expands, who knows, things could change.