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Restaurants Must #OrderDirect to Restore Their Financial Health

Restaurants Must #OrderDirect to Restore Their Financial Health

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The National Restaurant of Association of India (NRAI) has followed up its call to #OrderDirect with real action to enable its members regain control over order aggregation and delivery. It has also made a representation to the Competition Commission of India, in response to the regulator’s ongoing study on the e-commerce ecosystem, laying out its case against the two big aggregators. The NRAI’s message to member-restaurants is loud and clear: Connect directly with your customers and shore up your profits.

WHEN THE National Restaurant Association of India (NRAI) raised the banner of revolt in August 2020 against the “deep discounting practices” of food service aggregators (FSAs) – the “digital landlords,” as the leaders of the association choose to describe them – it made its intention abundantly clear: its #Logout Movement was just the beginning of a reimagining of the relationship between the restaurants and the FSAs (namely, Zomato and Swiggy).

The campaign, which led to the NRAI launching its technology-enabled #OrderDirect Movement this past May, took a more definitive turn when the restaurant trade body responded to an ongoing study on the e-commerce ecosystem initiated by the Competition Commission of India (CCI) with a memorandum that articulated its main grievances against the “deep-funded” FSAs. These are:

Exorbitant Commissions: The FSAs charged commissions in the range of 25 to 35 per cent of the order value in 2020-21 – and there’s been no let-up since then.

Delays in Payments: The NRAI alleges that there have been “numerous instances of delays” in payment by the FSAs, and that these have “affected the entire cash flow of our partners”.

Forcing Restaurants to Give Discounts: The FSAs are “forcing restaurant partners” to give discounts in order to assure themselves of good visibility on the two main aggregator platforms. These discounts add up to yet another cost burden on the restaurants.

Insistence on Price Parity: The FSAs, according to the NRAI, are threatening to delist restaurants if they do not maintain price parity. It cites instances where its partner restaurants being delisted from one platform or the other because they offered better rates to consumers on other channels.

The National Restaurant of Association of India (NRAI) has followed up its call to #OrderDirect with real action to enable its members regain control over order aggregation and delivery. It has also made a representation to the Competition Commission of India, in response to the regulator’s ongoing study on the e-commerce ecosystem, laying out its case against the two big aggregators. The NRAI’s message to member-restaurants is loud and clear: Connect directly with your customers and shore up your profits.

WHEN THE National Restaurant Association of India (NRAI) raised the banner of revolt in August 2020 against the “deep discounting practices” of food service aggregators (FSAs) – the “digital landlords,” as the leaders of the association choose to describe them – it made its intention abundantly clear: its #Logout Movement was just the beginning of a reimagining of the relationship between the restaurants and the FSAs (namely, Zomato and Swiggy).

The campaign, which led to the NRAI launching its technology-enabled #OrderDirect Movement this past May, took a more definitive turn when the restaurant trade body responded to an ongoing study on the e-commerce ecosystem initiated by the Competition Commission of India (CCI) with a memorandum that articulated its main grievances against the “deep-funded” FSAs. These are:

Exorbitant Commissions: The FSAs charged commissions in the range of 25 to 35 per cent of the order value in 2020-21 – and there’s been no let-up since then.

Delays in Payments: The NRAI alleges that there have been “numerous instances of delays” in payment by the FSAs, and that these have “affected the entire cash flow of our partners”.

Forcing Restaurants to Give Discounts: The FSAs are “forcing restaurant partners” to give discounts in order to assure themselves of good visibility on the two main aggregator platforms. These discounts add up to yet another cost burden on the restaurants.

Insistence on Price Parity: The FSAs, according to the NRAI, are threatening to delist restaurants if they do not maintain price parity. It cites instances where its partner restaurants being delisted from one platform or the other because they offered better rates to consumers on other channels.

A BUSINESS MUST WORK FOR ALL STAKEHOLDERS

The NRAI filed its original memorandum on July 1, 2021, and then, reacting to Zomato’s description of the restaurant trade body’s move as being “misplaced”, it followed up by presenting an additional 200-odd pages stacked with evidence on July 12. Media commentators were quick to point out how the timing of the NRAI’s move coincided with the run-up to the Zomato IPO, which turned out to be a record-creating listing. Has the mega-success of the Zomato IPO led to any change in the NRAI’s stand?

NRAI President Anurag Katriar responded to this query with a categorical ‘No’. “We are not against e-commerce – it is here to stay. What we are asking for is a healthier ecosystem. A business that does not make money for all its stakeholders is intrinsically flawed,” Katriar said. Taking the FSAs to task for their “highly detrimental and predatory trade practices,” Katriar asserted that “the terms of engagement between the two sides have to be equal at all times.”

Katriar’s NRAI colleague, Mumbai Chapter Head Pranav Rungta, said it had become “a David-versus-Goliath battle” after Zomato’s Rs 9,375-crore blockbuster IPO, which was reduced to Rs 5,178.49 crore after the company raised Rs 4,196.51 crore from its 186 anchor investors a day before the IPO opened for subscription, and with Swiggy raising $1.25 billion from SoftBank Vision Fund II, and existing investors Prosus (formerly Naspers), Accel and Wellington Management, in its biggest funding round since inception.

The NRAI’s representation, Rungta said, was in sync with similar moves by the Confederation of All-India Traders (CAIT) against Amazon and Flipkart and by the Federation of Hotel and Restaurant Associations of India (FHRAI) against the hotel room aggregator OYO. “We are confident that the CCI will initiate an inquiry against the unfair trade practices of Zomato and Swiggy,” Rungta added.

NRAI President Anurag Katriar responded to this query with a categorical ‘No’. “We are not against e-commerce – it is here to stay. What we are asking for is a healthier ecosystem. A business that does not make money for all its stakeholders is intrinsically flawed,” Katriar said. Taking the FSAs to task for their “highly detrimental and predatory trade practices,” Katriar asserted that “the terms of engagement between the two sides have to be equal at all times.”

Katriar’s NRAI colleague, Mumbai Chapter Head Pranav Rungta, said it had become “a David-versus-Goliath battle” after Zomato’s Rs 9,375-crore blockbuster IPO, which was reduced to Rs 5,178.49 crore after the company raised Rs 4,196.51 crore from its 186 anchor investors a day before the IPO opened for subscription, and with Swiggy raising $1.25 billion from SoftBank Vision Fund II, and existing investors Prosus (formerly Naspers), Accel and Wellington Management, in its biggest funding round since inception.

The NRAI’s representation, Rungta said, was in sync with similar moves by the Confederation of All-India Traders (CAIT) against Amazon and Flipkart and by the Federation of Hotel and Restaurant Associations of India (FHRAI) against the hotel room aggregator OYO. “We are confident that the CCI will initiate an inquiry against the unfair trade practices of Zomato and Swiggy,” Rungta added.

SEE ALSO: India Foodservice Delivery Report author says direct ordering will bring down market share of aggregators.

UNITED IN THEIR OPPOSITION TO BIG TWO

The NRAI immediately drew support from the restaurant associations of Thane, Pune and Vadodara. And it was soon joined by the FHRAI, whose National Vice-President, Gurbaxish Singh Kohli, stated unequivocally that an FSA was essentially a “marketplace and/or service-provider, akin to a travel agency or a discovery platform like the Yellow Pages of yore.”

Kohli added: “Their role is to merely aggregate services of the Industry; they DO NOT represent the Hotel and Food Service Industry. They cannot therefore decide or dictate commercial terms to and on behalf of the Industry.” The #Logout Movement, to quote the NRAI, “cemented the belief” of restaurants that they needed to take back control.”

The restaurant industry’s unprecedented ‘declaration of independence’ came at a time when it was struggling with the debilitating impact of the first national lockdown. As it emerged from the first wave of the Covid-19 pandemic, extracting some minor concessions from the FSAs, and with food delivery establishing itself as viable vertical, the NRAI leadership started working on #OrderDirect.

It was the association’s big push forward to enable restaurants to take back control of their customer data, which the FSAs still refuse to share, as well as save on the 25 to 30 per cent commission they have to pay out.

Gurbaxish Singh Kohli

UNITED IN THEIR OPPOSITION TO BIG TWO

The NRAI immediately drew support from the restaurant associations of Thane, Pune and Vadodara. And it was soon joined by the FHRAI, whose National Vice-President, Gurbaxish Singh Kohli, stated unequivocally that an FSA was essentially a “marketplace and/or service-provider, akin to a travel agency or a discovery platform like the Yellow Pages of yore.”

Kohli added: “Their role is to merely aggregate services of the Industry; they DO NOT represent the Hotel and Food Service Industry. They cannot therefore decide or dictate commercial terms to and on behalf of the Industry.” The #Logout Movement, to quote the NRAI, “cemented the belief” of restaurants that they needed to take back control.”

The restaurant industry’s unprecedented ‘declaration of independence’ came at a time when it was struggling with the debilitating impact of the first national lockdown. As it emerged from the first wave of the Covid-19 pandemic, extracting some minor concessions from the FSAs, and with food delivery establishing itself as viable vertical, the NRAI leadership started working on #OrderDirect.

It was the association’s big push forward to enable restaurants to take back control of their customer data, which the FSAs still refuse to share, as well as save on the 25 to 30 per cent commission they have to pay out.

Gurbaxish Singh Kohli

GENESIS OF THE #ORDER DIRECT MOVEMENT

NRAI Trustee Riyaaz Amlani, also a former president of the association, unequivocally spelt out the advantages of #OrderDirect: “Stop diverting traffic to aggregators, start bringing it back to your brands. People who like what you do should order direct! Let people discover you on discovery platforms. Direct ordering is the future! Let’s go back to the future!”

Small independent restaurants stand to benefit the most from the #OrderDirect. As Thomas Fenn, an NRAI Managing Committee member and co-founder of Mahabelly (New Delhi), put it: “[The aggregators] came in to solve a genuine problem, but their one-sided policies are destroying the business, especially small restaurants.”
Looking ahead, Fenn said: “The industry is working together to create an alternative technology solution to reorient and sustain their businesses in the post-Covid-19 world. For the NRAI, the focus is on easy reconciliation, transparent pricing, cheaper delivery and protection of customer data. The solution will be driven by customer loyalty, omni-channel online sales, integrated payment gateways and digitised delivery logistics. We are even exploring ways to leverage social media platforms such as WhatsApp, Facebook and Instagram to reach out to customers.”

Another independent restaurateur perspective was recently articulated by Gauri Devidayal, co-founder of The Table and Magazine Street Kitchen (Mumbai). “Reduce your dependence on aggregators by expanding your delivery radius through your own fleet,” Devidayal advised. “Focus on growing your revenue by cross-utilising your resources across brands. Also, people are spending long hours on their phone, so invest in digital marketing of your brands.”

The NRAI followed up its bold words with two ‘boot camps’ to offer alternative technology-led solutions to its member-restaurants in partnership with Thrive Now and Dotpe, and followed them up with one devoted to brand building and marketing, which alone can help restaurants improve their discoverability without depending on FSAs.

NRAI Trustee Riyaaz Amlani, also a former president of the association, unequivocally spelt out the advantages of #OrderDirect: “Stop diverting traffic to aggregators, start bringing it back to your brands. People who like what you do should order direct! Let people discover you on discovery platforms. Direct ordering is the future! Let’s go back to the future!”

Small independent restaurants stand to benefit the most from the #OrderDirect. As Thomas Fenn, an NRAI Managing Committee member and co-founder of Mahabelly (New Delhi), put it: “[The aggregators] came in to solve a genuine problem, but their one-sided policies are destroying the business, especially small restaurants.”
Looking ahead, Fenn said: “The industry is working together to create an alternative technology solution to reorient and sustain their businesses in the post-Covid-19 world. For the NRAI, the focus is on easy reconciliation, transparent pricing, cheaper delivery and protection of customer data. The solution will be driven by customer loyalty, omni-channel online sales, integrated payment gateways and digitised delivery logistics. We are even exploring ways to leverage social media platforms such as WhatsApp, Facebook and Instagram to reach out to customers.”

Another independent restaurateur perspective was recently articulated by Gauri Devidayal, co-founder of The Table and Magazine Street Kitchen (Mumbai). “Reduce your dependence on aggregators by expanding your delivery radius through your own fleet,” Devidayal advised. “Focus on growing your revenue by cross-utilising your resources across brands. Also, people are spending long hours on their phone, so invest in digital marketing of your brands.”

The NRAI followed up its bold words with two ‘boot camps’ to offer alternative technology-led solutions to its member-restaurants in partnership with Thrive Now and Dotpe, and followed them up with one devoted to brand building and marketing, which alone can help restaurants improve their discoverability without depending on FSAs.

SEE ALSO : OPINION: Is Your Tech Platform Serving You Well?

The face-off is about not only the irrational commission charged by the FSAs, or the culture of discount hunting fostered by them. Katriar underlined the importance of restaurants regaining “the lost emotional connect between [them] and their patrons.” He said: “Every restaurant enjoyed an emotional connect with its guests. It seems to have been lost in the past few years. Guests have become nameless order numbers because their identities are being masked by the aggregators.”

The industry has four principal complaints against the ‘digital landlords’, who, they say, are “competing with us and not complementing us”:

They squeeze restaurants in a pincer action that involves both deep discounting and high marketing fees.

They hold back customer data, not allowing restaurants the twin benefits of customer data analytics and customer relationship management.

They charge a hefty commission – 25-30 per cent – per order delivered to a customer.

They give preferential treatment to their own private brands, such as Swiggy’s The Bowl Company and Homely.

The NRAI’s rallying cry has been: “Aggregators divide and conquer. We can unite and reclaim.” Its #OrderDirect initiative therefore seeks to achieve three objectives:

Own Your Customer Data: Have access to the history of each order and build a direct relationship with customers. Funnel the audience intelligence to make targeted offers. Become a ‘data masterchef’.

Go Live Everywhere: Handle all integrations with a single backend. Sign up once, and sell everywhere – from Facebook, Instagram and WhatsApp to Airtel and Jio. Multiple channels mean more choices for both restaurants and customers.

Choose Your Delivery Vendors: Integrate with delivery vendors of your choice and integrate them with your own fleet. Dependence on aggregators means that you have to use the delivery vendors of their choice and pay the price they demand.

The time has come, says the NRAI, to “disrupt the distorters.” And with the support of a host of first movers, from Domino’s and Taco Bell to Riyaaz Amlani’s Social and Aseem Grover’s The Big Chill, the association has shown how it is possible.

The face-off is about not only the irrational commission charged by the FSAs, or the culture of discount hunting fostered by them. Katriar underlined the importance of restaurants regaining “the lost emotional connect between [them] and their patrons.” He said: “Every restaurant enjoyed an emotional connect with its guests. It seems to have been lost in the past few years. Guests have become nameless order numbers because their identities are being masked by the aggregators.”

The industry has four principal complaints against the ‘digital landlords’, who, they say, are “competing with us and not complementing us”:

They squeeze restaurants in a pincer action that involves both deep discounting and high marketing fees.

They hold back customer data, not allowing restaurants the twin benefits of customer data analytics and customer relationship management.

They charge a hefty commission – 25-30 per cent – per order delivered to a customer.

They give preferential treatment to their own private brands, such as Swiggy’s The Bowl Company and Homely.

The NRAI’s rallying cry has been: “Aggregators divide and conquer. We can unite and reclaim.” Its #OrderDirect initiative therefore seeks to achieve three objectives:

Own Your Customer Data: Have access to the history of each order and build a direct relationship with customers. Funnel the audience intelligence to make targeted offers. Become a ‘data masterchef’.

Go Live Everywhere: Handle all integrations with a single backend. Sign up once, and sell everywhere – from Facebook, Instagram and WhatsApp to Airtel and Jio. Multiple channels mean more choices for both restaurants and customers.

Choose Your Delivery Vendors: Integrate with delivery vendors of your choice and integrate them with your own fleet. Dependence on aggregators means that you have to use the delivery vendors of their choice and pay the price they demand.

The time has come, says the NRAI, to “disrupt the distorters.” And with the support of a host of first movers, from Domino’s and Taco Bell to Riyaaz Amlani’s Social and Aseem Grover’s The Big Chill, the association has shown how it is possible.

By Sourish Bhattacharya

Published On: 10/08/2021

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