While focusing on the slowdown in the food delivery business and profitability, the food delivery firm Zomato is asking restaurant partners to pay higher commissions.
Zomato Asking Higher Commision
It appears that several restaurant partners across major cities including Mumbai, Delhi, Bengaluru, and Kolkata have received notices from Zomato.
In this notice Zomato is asking for a 5%-6% increase in commissions over the past week, according to the sources.
Further adding, “The company is arm-twisting restaurants saying if they don’t accept the higher commission rates it will result in a reduction of delivery radius to under 3 kilometers. Some have also been warned of a compromise in visibility on the platform,”.
Usually, Zomato charges a 15%-22% commission per order exclusive of payment gateway charges and GST.
On the other hand, its rival, Swiggy charges in the range between 9%-22% per order depending on the average order value (AOV) with a higher AOV attracting lower commission.
Higher Commision By Industry Standard
Here it is notable that the Swiggy’s structure to command a price depending on the value of the order puts Zomato at a disadvantage.
In response to this, Zomato spokesperson said, “We keep reconsidering our commissions to make sure they are competitive and sustainable for restaurant partners as well as Zomato.”
Zomato’s move to seek upward revision in commission rates citing rationalization with other aggregator platforms is “unacceptable” and “irrational”, said Pranav Rungta, Mumbai chapter head at the National Restaurants Association of India (NRAI).
It looks like Zomato’s battle with restaurant partners is likely to intensify over the next few months as the company doubles down on profitability and increases revenue through food delivery and dining divisions.
The NRAI’s spokesperson said, “These sort of unilateral increases are unfair trade practices and NRAI vehemently opposes it. However, if Zomato is keen to resolve this impasse and reaches out to us, NRAI will be happy to discuss this with the Zomato leadership team,”.
Here, the National Restaurant Association of India (NRAI) is an apex body that represents over five lakh restaurants in India.
It has been at loggerheads with aggregators including Zomato and Swiggy, challenging the deep discounting practices and masking of data.
In the meantime, this body also filed a complaint against the food delivery platforms with the Competition Commission of India (CCI) stating anti-competitive practices.
On Zomato’s part, the food aggregator is struggling to contain the degrowth in food delivery volumes, with adjusted revenue declining 1.0% in Q3 from the preceding quarter.
Zomato CFO, Akshant Goyal said, “We have seen an industry-wide slowdown in the food delivery business since late October (post the festival of Diwali). This trend has been seen across the country but more so in the top 8 cities,” in its earnings statement.
