Zomato and its rival Swiggy have been at arms with restaurant partners since 2020, with the latter alleging that the aggregators offer deep discounts to boost their customer base, making their business unsustainable. Further, restaurant partners have alleged that platforms charge uneven commissions.
Foodtech giant Zomato has reportedly approached several restaurant chains seeking a 2-6% increase in commissions as its losses widen and the pressure to go profitable mounts. However, these restaurant operators have refused to accept the demand. According to sources the company has been reaching out to restaurants for a week. The sources said Zomato has told the restaurants that they could be delisted.
The food-tech major has also reportedly told the restaurant partners that it could reduce their visibility and delivery radius if they fail to adhere to its demand. However, many restaurants have reportedly stuck to their guns, prompting a fresh conflict between Zomato and restaurants. The National Restaurant Association of India (NRAI) has said that it would take the issue of increasing commissions up with Zomato on behalf of its restaurant partners.
The development follows after Zomato has been charging restaurant partners an 18-25% commission per order for deliveries, depending on specific arrangements. Incidentally, the food delivery giant had said it had no plans to increase the restaurant commission in July 2022, after Inc42 had reported that popular pizza chain Domino’s India might delist if the food tech increases commission.
“Zomato is very conscious of its stakeholder relationships, whether with restaurant partners, delivery partners, or customers. No commercial decisions are unilaterally taken that may adversely impact any of our stakeholders,” said a Zomato spokesperson back then.
The food tech’s move also comes after it reported a net loss of INR 346.6 Cr in Q3FY23, up 38% sequentially. While its operating revenue was up sequentially, the company’s food delivery business took a hit during the December quarter. The food delivery vertical generated an adjusted revenue of INR 1,565 Cr in Q3FY23, down 1% from INR 1,581 Cr in Q2FY23. Average monthly transacting users also fell QoQ to 17.4 Mn in the December quarter from 17.5 Mn in Q2 FY23.
Amid the slowdown in the food delivery business, Zomato has also pulled out of 225 cities across the country citing low performance. In a post-earnings letter to shareholders, Zomato CEO Deepinder Goyal had said the slowdown was a result of “a few temporary factors” and that “we believe that the long-term opportunity remains large and exciting”.
The matters escalated in April 2022 when the Competition Commission of India (CCI), ordered a probe into the conduct of both Zomato and Swiggy after the NRAI approached the competition watchdog in July 2021.
