Frustrated by the steep commissions and discounts
that apps like Zomato and Uber Eats push on restaurants, thousands have started
a movement to #Logout from them.
By
Vindu Goel and Ayesha Venkataraman
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Aakanksha
Porwal at her restaurant, Vahnilla & Company, in the Mumbai suburb of
Thane.A
discount program from the delivery app Zomato has cost her about 20
percent of
revenue, she said. Credit Atul Loke for The New York Times
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MUMBAI,
India — Aakanksha Porwal,
the owner of a small retro diner called Vahnilla & Company, recently signed
up for the Zomato food delivery app to make dishes like her veggie
cheeseburgers and Kit Kat cakesicles available to a wider audience. She also joined
Zomato’s Gold program, where she would offer two dishes for the price of one to
members who came to dine in person.
The goal was to help expand her nascent
business. But three months and 150 free dishes later, Ms. Porwal has grown
disillusioned.
The free food has cost her about 20 percent
of her revenue, on top of a Zomato Gold sign-up fee of about $550, she said.
Gold users, who pay about $14 for a year of buy-one-get-one-free dining at
6,000 restaurants, are often rude and demand extra discounts, she added. And
Vahnilla pays Zomato a steep commission of 28 percent on every order that is
delivered.
“Zomato is the greatest thing to happen to a
customer,” Ms. Porwal said. “The consideration for restaurant owners is
literally nothing.”
Now, in a collective primal scream, India’s
restaurants are rebelling against Zomato and other leading dining apps.
Two weeks ago, a group of restaurant owners
near New Delhi called for an end to the steep food discounts constantly offered
by Zomato and competitors like Swiggy and Uber Eats. They argued that the costs
fell on eateries while the apps reaped the rewards. The protest, which has
drawn public support from thousands of eateries, has its own hashtag, #Logout.
Many have either left the Gold program or pledged to do so.
“The consumer believes that a discount has
been his right, not a privilege,” said the leader of the insurrection, Rahul
Singh, who is the chief executive of the Beer Café restaurant chain and the
president of India’s National Restaurant Association. “But all of this is
coming out of the restaurants’ pockets.”
The frustration goes beyond India. As food
ordering and delivery increasingly move online, restaurateurs and delivery
workers around the world are questioning the small share of the pie they get
from powerful gatekeepers like Zomato in India, Grubhub and DoorDash in the
United States, and Deliveroo in Europe.
The apps have made it easier for people to
order takeout meals, and restaurants have gotten exposure to a larger audience
of diners. But the platforms also charge hefty commissions on each order and
can squeeze the profit margins of culinary establishments. In the United
States, some restaurants have closed, unable to keep up with the cost of
working with the delivery apps.
The revolt in India underscores how tense the
relationship between restaurants and the dining apps has become. On Thursday,
restaurateurs spent all day meeting with top executives of Zomato and Swiggy,
but failed to settle their differences.
“The customer is addicted now,” Satish Meena,
a senior forecast analyst in the New Delhi office of Forrester, a global tech
research firm, said of the apps. “They have trained the customer that if
there’s not a discount today, I’ll wait because tomorrow there will be another
discount.”
The Indian food delivery apps said they
provided a valuable and costly service that was underappreciated by their
restaurant partners. But they are also making some changes in the face of the
rebellion.
Shortly after the #Logout campaign began,
Zomato’s chief executive, Deepinder Goyal, apologized on Twitter for the
financial pain that “bargain hunters” had caused some restaurants. Last week,
he sent an email to all of the Gold restaurants announcing 10 changes in
response to their concerns, including a once-a-day limit and a doubling of the
annual subscription price to about $25.
But he refused to end the program. Just the
opposite: In an interview last Friday, Mr. Goyal said he intended to expand
Zomato Gold to delivery. About 18,000 restaurants had already signed up, he
said, and Zomato would soon test the idea with a small group of customers.
He argued that for many restaurants, the
extra foot traffic from Gold was a vital source of business.
“Ninety percent of the restaurant base says,
how can you get me more customers?” Mr. Goyal said. “At the end of the day,
it’s the restaurant’s choice. Who is forcing you to be on Gold?”
Mr. Goyal said he understood why some
restaurant owners felt that Zomato’s delivery commissions were unfair. But he
noted that the cost for Zomato to process and deliver an order was about 65
rupees, or 91 cents, while the average order size in India was 235 rupees, or
$3.27.
“We’re losing 7 rupees an order,” he said.
That logic garners little sympathy from
restaurateurs, who are coping with a general economic slowdown and higher
prices for fruits and vegetables in places like Mumbai.
The restaurant owners said Zomato and Swiggy,
which have together raised nearly $2 billion in funding, had decided to push
discounts over everything else.
The home screens of both apps give top
billing to whichever restaurants — usually big chains like Burger King or
Domino’s Pizza — are offering the biggest deals that day.
“Sometimes with all the discounts, it’s
cheaper for the customer to order online than cook at home,” said Anurag
Katriar, who runs a group of European-style restaurants under the Indigo brand
and heads the Mumbai chapter of the restaurant association. “For the
aggregators, it’s the number of users and clicks that builds their value.”
Another sore point is customer data. Neither
Zomato nor Swiggy shares customers’ names and phone numbers with the restaurant
that fills the order, citing privacy concerns. Restaurant owners said that left
them with no way to market directly or build long-term relationships with their
best customers.
Zomato and Swiggy also keep cooking up
promotions and programs to provide value to app users — often at the expense of
the restaurants.
Zomato recently enrolled about 250
restaurants in an experiment called Infinity, in which people could eat as much
as they wanted from a restaurant’s entire menu for a flat price. The ensuing
gluttony was difficult for restaurants to manage and resulted in a lot of
wasted food. Mr. Goyal said Zomato now planned to limit the unlimited dining to
selected items like pancakes or dosas.
Swiggy, which is focused entirely on
delivery, is beginning to compete directly with restaurant partners through its
own brands, which make food in special, delivery-only “cloud kitchens.” The
restaurant industry has asked India’s antitrust regulators to block the
in-house brands. Swiggy declined to comment on the matter.
The frustrations came to a head on Aug. 13,
just before India’s Independence Day.
About 300 restaurant owners in Gurugram, a
New Delhi suburb that is home to many tech companies, including Zomato, decided
they were tired of losing money to patrons of Zomato Gold. They made a pact to
pull out of Gold and other discount programs for a few days, saying that they
wanted to “detox consumers from discount addiction.”
News of the protest went viral. Within days,
more than 2,000 restaurants — from white-tablecloth establishments to
neighborhood dosa shops — joined in. This week, the industry called for
additional changes to the food delivery programs operated by the major players,
including Uber Eats.
During meetings on Thursday to discuss those
requests, Swiggy said it would limit the frequency of discounts and look at
ways to share the costs, according to Mr. Katriar, the Mumbai restaurant
association head, who attended. But Zomato indicated that it would press
forward with Mr. Goyal’s plan to expand Gold to delivery, which could further
damage restaurant finances.
A Swiggy spokesman said the meeting had been
“constructive and collaborative.” A Zomato spokeswoman did not respond to
requests for comment
The protests have left Zomato struggling to
find the right balance between its competing sets of customers: the 1.2 million
paying Gold users and the thousands of restaurants it needs to make the program
valuable.
“Gold has been a super-duper success, and
that has been the trouble,” Mr. Goyal said. “Maybe there is 1 percent that
abuses Gold, but that’s not the norm.”
One typical Gold user is Anushka Jankar, who
dined at Vahnilla on a recent Tuesday afternoon with two friends. She said that
it was her first time there and that she had discovered the place through the
app.
Ms. Jankar said Gold did not dominate her
dining choices, though. “I eat out a lot, and I’m a big foodie,” she said.
“Basically I use it when it’s the end of the month and my bank balance is low.”
The program also works better for some
restaurants than others.
Rudresh Agarwal, co-owner of Carpe Diem, a
bar and shisha lounge in Kolkata, in eastern India, said he lost a little money
on Gold diners but viewed the program as a way to get exposure. He said he
could afford the losses because he profited from the liquor and shisha, or
water pipes, that his restaurant served.
For a place that offers only food, however,
the Gold discounts could be devastating. “If you do not have other products,
the cost will not work,” he said.
Ms. Porwal said she was sticking with the
Gold program for now. She said she was grateful that fellow restaurateurs had
pushed Zomato to improve the program, and wants to see how the changes, which
go into effect in a few weeks, play out.
Mr. Goyal said Zomato would keep listening to
the restaurants, even if they did not always see eye to eye.
“We know that whenever the industry grows,
Zomato grows along with it,” he said.
