Powerful Restaurant Lobby Issues Alert Against Zomato, Swiggy’s Dine-Out Discounts: Not Worth It?

The National Restaurant Association of India (NRAI) has advised its partner-members against programs being tested by Swiggy and Zomato offering discounts and promotions on dine-in orders.

What are the programs?

The two new discount-driven features- Zomato Pay and Swiggy Diner- offer a host of benefits to diners at the cost of restaurants, NRAI claimed.

Zomato Pay works as a payment feature embedded within the Zomato app.

Customers can opt to pay the bill with this and unlock offers such as cash-backs and discounts.

Participation requirements

To participate in the program restaurants must compulsorily offer a discount of 15-40% and pay a commission of 4-12% on every transaction made to Zomato or Swiggy.

In return, restaurants are promised higher footfalls.

Other payment gateways charge between 1 percent and 1.5 percent on such transactions.

NRAI said on Friday that nothing is stopping Zomato and Swiggy from increasing their discount requirements as well as per- transaction commissions once that happens.

While they are currently funding the cash-backs to the customers, that too can “easily change”.

Poaching customers

It has advised restaurants to understand these programs well, “inspect the terms and conditions thoroughly and then make an informed decision on their participation in these programs.”

NRAI cautioned that such programs can impact the overall restaurant ecosystem in the long run.

““Your” customers will eventually firmly become “their” customers,” it wrote.

Of ‘no value’ to industry?

It said that both programs build a payment gateway and incentivize customers to use this payment gateway (through discounts, 100% cash backs and bank offers).

They also urge partner restaurants to adopt this payment gateway under the “unsubstantiated promise” of more footfalls.

The product brings no “tangible” value to restaurants or solve any pressing problems of the industry.

Rather, it only helps Swiggy and Zomato get a “firm foothold” in the dine-in business at the cost of restaurants where dining will become “unsustainably cheaper”.

How is Zomato doing?

 A spokesperson for Zomato said its new dining product, now live in Hyderabad for a few weeks, is showing “great results”.

They are “confident” of creating “tremendous value and growth for the industry”.

“We are looking forward to working with progressive restaurants in the industry,” the spokesperson added.

What is Swiggy up to?

Swiggy had acquired restaurant tech solutions platform Dineout from Times Internet in May.

It said at the time that it will “double down on the synergies with Dineout’s offerings, including dining out table reservations and events. 

In time, restaurant partners will be able to reach more customers and grow their business.”

Anti-competitive practices brought before CCI

NRAI’s advisory once again brings up tensions between aggregators and top restaurant chains that have called for leveling the playing field with aggregators.

It had approached the Competition Commission of India last year with evidence to back allegations of anti-competitive practices such as data masking and charging of exorbitant commissions by food aggregators.

Following this, CCI said it will investigate practices around masking of customer data from restaurants, exclusivity clauses, launching of private labels and preferential agreements with some restaurant partners.

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