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NRAI flags deep discounting, high commission charges, private labels in letter to food aggregators

Graphic showing app-based food ordering

Amidst the ongoing #Logout movement, the National Restaurant Association of India (NRAI) has sent letters to all food aggregators including Zomato, Swiggy, UberEATS, Foodpanda on August 26, flagging several issues such as lack of transparency, deep discounting and abuse of dominant position by the food aggregators. “This is specially impacting the growth, employment and sustainability of the thousands of small restaurants and start-ups in the country,” NRAI wrote in its letter (attached below).

“There is a very strong demand to immediately extend the #Logout movement to the online delivery vertical as well. Let me reiterate that we are not against the technology platforms, but our concerns are largely around these aggregators misusing their dominant position to indulge in predatory behaviour; commercially and informing the terms of engagement,” said Anurag Katriar, Head of NRAI Mumbai Chapter.

We have reached out to UberEATS, Zomato, Foodpanda and Swiggy for comments, we’ll update this when we hear from them.

NRAI’s letters to Zomato, Swiggy, Foodpanda and UberEATS: deep discounting, customer data

Apart from its letter to all aggregators, NRAI addressed separate letters to the four largest aggregators — Zomato, Swiggy, Foodpanda and UberEATS — enlisting major issues faced by restaurants:

  • Customer data masking: Aggregators don’t share user data with the restaurants, which disconnects them from consumers; aggregators also use the data to divert traffic for their own commercial benefit. “In the interest of consumer privacy, we also want strict assurances against monetising the data of our customers,” the letters read.
  • Deep Discounts: Discounts ranging from 30-70% “distorts the market and hinders profitable growth of the sector”; these discounts are mostly funded by the operators and sometimes under “coercion”.
  • High and uneven commission charges: Commission charges levied by aggregators are predatory and uneven. The association requested the aggregators to create a transparent system of charges based upon average order value (AOV), volume of business, etc.
  • Arbitrary terms and conditions: The terms and conditions upon which the restaurants’ enlist themselves on aggregator platforms are not standardised and favour the aggregators, the association asked for a standardised framework and contracts for the restaurants.
  • Private Labels: Large delivery aggregators are using sales and user data to create their own brands, thus creating unfair competition with other restaurants.
  • Forced use of services: Restaurants are forced to use delivery services of aggregators even when they have their own delivery infrastructures; they suffer losses if the aggregator lacks delivery personnel in certain areas. This issue can get solved if the restaurants are allowed to use their own logistics services.
  • Arbitrary rules of engagement: The aggregators levy unreasonable rules and penalties on the restaurants while the company itself does not take any responsibility for covering financial losses made by the delivery personnel in case of wrong delivery, lack of delivery personnel, technical glitch on their apps, etc.
  • Search algorithms: According to the association, the parameter used for ranking the restaurants on its platform is “not transparent or consistent”.

Tussle between food aggregators and restaurant partners

The NRAI had started a #Logout campaign on August 14 claiming that it was protesting “against aggregators who have distorted a vibrant marketplace by aggressive discounting and predatory pricing”. In the aftermath of this campaign, Zomato CEO Deepinder Goyal had tweeted, on August 17, that Zomato had made “mistakes” and things hadn’t gone according to plan. He said that they needed to “do 100x more for our restaurant partners than we have done before”. Several restaurants had de-listed themselves from platforms such as Zomato Gold, EazyDiner, and Dineout’s Gourmet Passport, among others. These restaurants were protesting against discounts being offered by such platforms. According to a Livemint report, now almost 2,500 restaurants have de-listed themselves from the food aggregating platforms to protest against discount practises.

Last week, Minister of Railways and Commerce Piyush Goyal said that he would like to “intervene” between Zomato and the restaurants in order to help them resolve their issues. He suggested that restaurateurs and food aggregators sort the issues among themselves and he can intervene if they want. “I would suggest that you sort it out quickly amongst yourselves, and if you can’t, I am happy to intervene,” Goyal said.

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