With a sharp increase in demand for food deliveries across states, as well as strict curbs to contain the third wave of the COVID-19 pandemic and many restaurants closing their doors, discounts on Swiggy and Zomato have dried up.
With restaurants shut down or operating under severe curbs, the aggregators too rework their business models and try to maximise their profitability, “said AD Singh, managing director of Olive Group, which runs marquee restaurant brands such as Olive Bar and Kitchen, SodaBottleOpenerWala and The Grammar Room
Heavy discounting offered by the two leading food ordering platforms has been a bone of contention between them and the Rs. 4.2 lakh-crore restaurant industry that has been working under severe cost pressure since the coronavirus outbreak and the first lockdown in March 2020.
According to many restaurant owners, delivery has become the only mode of survival now. Earlier, the aggregators were pushing the habit creation of deliveries, but now that the habit has been created, they too have realised that deep discounting is not the way forward.
As and when the situation normalises and restaurants reopen, heavy discounts by aggregators will come back. Also, the current decline in discounting is cyclical after heavy Christmas and New Year discounts.
The development comes amid a mass shutdown of restaurants and pubs in some cities, particularly Delhi, where the Delhi Disaster Management Authority (DDMA) recently ordered restaurants and bars to stop dine-in services, allowing only delivery services and takeaways.
The new guidelines, which prohibit dining completely and allow only deliveries, are “completely unsustainable,” NRAI president Kabir Suri said.
It said there are more than 95,000 organised and unorganised eateries in Delhi. This latest round of restrictions comes after months of shutdown during the first and second waves, followed by operations being allowed at 50% capacity. Some industry executives pointed to rising raw materials and fuel costs to justify higher prices.
Also, starting January 1, the Centre has directed Swiggy and Zomato to collect and deposit tax at a 5% rate to bring food vendors who are currently outside the goods and services tax (GST) threshold under the tax net. India’s largest quick-service restaurant chain, Jubilant FoodWorks, which operates Domino’s Pizza and Dunkin’ Donuts, recently increased prices by 5–6% across its portfolio.
“Domino’s India remains focused on maintaining its value-for-money proposition,” the company said. “We view the pricing action positively as it helps offset some margin pressure with a limited impact on demand.” Vegetables, edible oils, and fuel have increased by up to 20% over the last year. Retail inflation hit a five-month high in December when consumer prices, led by food and manufactured items, rose 5.59% year on year and by 4.91% month on month, according to data by the Ministry of Statistics. While dine-in business has taken a hit, sales through delivery have surged in large food service markets such as Maharashtra, Karnataka and Punjab.
Zomato and Swiggy reported record numbers of deliveries on New Year’s Eve. Zomato said it reached 2.5 million orders for the first time in one day, while Swiggy crossed 2 million orders. Last month, NRAI moved the Competition Commission of India (CCI) alleging that Swiggy and Zomato were forcing restaurant partners to give discounts.
