Food Delivery Models: The Impact of Pricing Strategies

Food delivery models such as Swiggy’s Toing and the government-supported Open Network for Digital Commerce (ONDC) are gaining momentum with more affordable commission structures. As a result, restaurants are increasingly implementing differential pricing across various platforms. This shift, however, seems to be causing some tension with the dominant player, Zomato.

Concerns Over Pricing Discrepancies

According to discussions with over eight restaurant partners, Zomato’s relationship managers (RMs) have reached out to ensure pricing uniformity across platforms. Several restaurant owners revealed to Startup Superb that they were informally advised to align their prices on Zomato with those on alternative platforms. Some indicated that failing to comply might negatively impact their visibility or performance on the platform, although there was no formal communication regarding this issue.

The Rise of Competitors

This situation unfolds as alternative ordering platforms like ONDC and Swiggy’s Toing present lower commission rates compared to larger food delivery services. This has allowed restaurants to offer reduced prices to consumers, capitalising on additional demand from new platforms. A restaurant owner, who chose to remain anonymous, stated that the primary factor is straightforward economics. Lower commissions empower restaurants to provide more competitive prices on alternative platforms without compromising their margins. Nevertheless, they have begun receiving inquiries from Zomato’s relationship managers regarding pricing variances.

Current Market Dynamics

At this moment, order volumes from these emerging platforms are relatively low, accounting for around 1-2% of the total food delivery demand for most restaurants. However, industry experts anticipate this landscape may shift as consumer adoption grows, potentially raising competition and scrutiny at the platform level.

Zomato’s Official Position

Zomato has denied any involvement in influencing the pricing policies of restaurants in response to a detailed questionnaire from Startup Superb. An official spokesperson stated that Zomato does not set or influence menu items, pricing, or descriptions, as these are exclusively decided by the restaurants. They acknowledged that certain restaurants maintain different prices across various channels, but such decisions are made by individual establishments based on their business objectives. The spokesperson also noted that customers tend to appreciate consistency across platforms, and partners who deliver that often benefit from increased trust and repeat business.

Underlying Tensions in the Market

While Zomato advocates for pricing consistency to uphold consumer trust and platform integrity, restaurants are increasingly pursuing the freedom to optimise their margins by experimenting with new low-commission options. Given Zomato’s strong position in the market, any perceived push for pricing uniformity could create challenges for emerging platforms attempting to use cost advantages to gain market share.

Challenges in the Current Landscape

This situation emerges amid substantial disparities, with some customers noticing differences as high as 25% between in-restaurant prices and those on platforms, including Zomato. Restaurant owners have pointed to the commission and advertising fees they encounter, leading to the struggle of not generating profit on certain orders. Additionally, promotional tactics used on various orders have raised major concerns, highlighting a breakdown in communication that has adversely affected initiatives like Zomato Gold.

Moreover, the growing presence of ‘dark’ or ‘cloud’ kitchens on these platforms raises significant trust issues regarding quality. As competition intensifies and alternative models develop, the ongoing tension between pricing autonomy and platform influence is likely to be a critical issue in India’s evolving food delivery market.