These Restaurants Take Fight To Zomato, Swiggy With A Dash Of Secret Ingredient

A food delivery courier carries cartons of food from a kitchen restaurant in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg

These Restaurants Take Fight To Zomato, Swiggy With A Dash Of Secret Ingredient

Restaurants have made stray attempts against fees charged by Zomato and Swiggy without success. A group of premium outlets is again taking on the duopoly, not only to lower costs but to also get control over customer data.

The aggregators deduct up to a third of the order value as their share. Zomato and Swiggy also keep user data secret. A treasure trove to understand customer behaviour that could help tweak menus, alter prices and drive sales. Both costs and potential insights into buying preferences have become even more crucial during the pandemic when dine-ins have all but stopped and nearly all orders come online.

For the restaurants that have mounted the challenge, the idea is simple. Rope in software platforms such as Dotpe, Thrive, Eatable, Peppo, Airtable and Posist to take orders and manage the backend. And either deliver via own riders or outsource to cheaper service providers like Dunzo and WeFast.

The rebellion not even remotely threatens InfoEdge Ltd. and Ant Financial-backed Zomato, and Prosus Ventures-supported Swiggy. A market dominated by two players emerged after nearly a decade of cutthroat competition that saw about a dozen such aggregators, including Uber Eats and Foodpanda, fail. And the two can easily outspend others. Still, the push for direct delivery could become an alternative model for premium chains.

“With data I can learn what dish the customers are eating more, what’s the frequency of the repeat buyers and I could target them accordingly,” said Pranav Rungta, a restaurateur for a decade. “It helps us rework menus based on demand.”

Swiggy and Zomato use the same information to set up cloud or co-branded kitchens and charge a hefty commission, said Rungta, who operates Curry Me Up, Chow Me Up, Café Royal, Headquarter and Tamak in Mumbai.

Yash Bhanage, the founder of Hunger Inc, the parent of The Bombay Canteen and O Pedro, said his firm changed the delivery menu heavily in the last one year based on direct feedback. “That aided sales. And we try special menus sometimes.”

About 35% of his clientele is repeat customers. “Three months ago, we moved to Thrive as we realised customers increasingly prefer direct ordering,” he said. About 60% of the orders now are direct.

The Cost Tradeoff

Prior to the lockdown, dine-ins accounted for 60% of Rungta’s revenue.

“Earlier, an aggregator didn’t pinch because we were giving commission of about 25% on 40% of the orders. But the lockdown meant commission on all,” said the 38-year-old. “To stay afloat, we needed a direct channel. We started testing Dotpe around June last year, which was already helping us with a QR-code menu.”

A year later, Rungta said, more than 30% of the orders are direct against 5% earlier. Overall profitability is up 9%.

Yet, the tradeoff is not that simple.

Dotpe charges restaurants Rs 1-1.5 for every order, marketing itself as a cheaper alternative to the big apps. The outlets can either deliver through their partnered apps or organise own deliveries, just like Domino’s. All that also costs money.

If the average order is less than Rs 300, there are hardly any savings over what aggregators charge, according to estimates shared by Rungta's Mint Hospitality Pvt., The Bombay Canteen and Queen's Margherita Pizza. But as the value increases from Rs 408—the average ticket size disclosed by Zomato in its IPO filing—direct delivery can help outlets save about 24%. The gap goes to as high as 40% on a meal worth Rs 1,000.

BloombergQuint awaits Zomato and Swiggy’s response to emailed queries.

Hunger Inc used the savings to increase its marketing spends by 20-30% during the pandemic. “For brands like us where we have our own marketing push and a loyal base, the same amount of money that we spent on aggregators can be used towards investing on brands and creating mechanisms that can help us improve profitability,” Bhanage said.

Yet, by Rungta’s own admission, experience isn’t as smooth as in case of the aggregators. But it’s manageable as long as the customer is getting value in terms of best pricing, he said, because restaurants aren’t marking up menu prices to offset commissions.

Thrive has seen orders nearly triple by May from 6,000 in March, said co-founder Dhruv Dewan. Last month, it on-boarded 800 eateries. While Thrive has tied up with 3,600 outlets, Dotpe has partnered 15,000.

It’s a tiny experiment compared with the overall food ordering market that a report by Boston Consulting Group expects to hit $7.5-8 billion in 2021-22 fiscal.

The pushback against the aggregators, however, gained momentum during the pandemic as the lockdowns are estimated to have driven thousands of eateries to closure even before the deadlier resurgence of Covid-19.

One in three or four restaurants may not survive the second wave impact due to high debt levels, said Riyaaz Amlani, managing director and chief executive officer at Impresario Entertainment and Hospitality Pvt. and the former president of the National Restaurant Association of India.

The duopoly isn’t good for the business when the industry is grappling with survival, he said.

The NRAI has organised multiple town halls with outlets to push direct ordering. Amlani said initial results are encouraging.

“We have seen 300-400% growth in direct orders,” he said. “For many restaurants including mine, they account for 20% of the total orders received online, up from 5% last year.”

<div class="paragraphs"><p>Food delivery courier motorcycles sit parked outside a Domino's Pizza Inc. restaurant, operated by Jubilant Foodworks Ltd., at night in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg</p></div>

Food delivery courier motorcycles sit parked outside a Domino's Pizza Inc. restaurant, operated by Jubilant Foodworks Ltd., at night in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg

The industry is also looking to boost discoverability outside aggregators’ platforms. Dotpe has tied up with GooglePay, also its investor, to allow customers to look up outlets and menu. Thrive offers something similar. The NRAI is working on a nationwide loyalty app, a person aware of the initiative said on the condition of anonymity as details aren’t public yet.

Yet, majority of the restaurants don’t have the means to opt for direct delivery. Most of the customers in the low-value order category are discount seekers, said Rungta. These are the guys who will go to an aggregator for a better deal, he said.

And the ordering platforms have massively expanded the pie and enhanced visibility, Rungta said. They gave confidence to many more to venture into the business, he said.

His own experience suggests that going direct doesn’t yield results for outlets with low-cost meals. Rungta’s two cloud-kitchens Curry Me Up and Chow Me Up get less than 5% direct orders. That, however, goes up to 33-38% for his premium Tamak and Café Royal eateries.

“Standalone and direct delivery ‘is a big boys club’ and requires a lot of commitment on tech, efforts and brand connect, said Ankur Bisen, senior vice president, Technopak Advisors, citing the examples of Barbeque Nation, Dominos Pizza and Burger King. “But for a local restaurateur, it requires effort and money.”

Until, he said, a low-cost new model emerges that exploits the anomalies in the aggregator business.

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