Calling out food delivery apps for steep charges to restaurants, of as much as a total of 55%, restaurateurs Riyaaz Amlani and Zorawar Kalra say networks like the Open Network for Digital Commerce (ONDC) could help their businesses become more profitable.
The restaurateurs said on a podcast that Zomato and Swiggy are eating up around 55% of their order values through charges for delivery, discounts and discovery.
Speaking to Zerodha co-founder Nikhil Kamath on a podcast, they asserted food delivery commissions beyond 12% are simply not sustainable. Aggregators, they pointed out, were current charging around 24-28%.
Pointing out that it is good to have a balance, Zorawar Kalra, MD and co-founder, Massive Restaurants, said, “I want to have 25-30% of our orders to be done directly and get feedbacks directly from your consumers.”
“There are enough third-party apps or aggregators who can take your products to the end users but they are not as seamless as the current aggregators,” Kalra added.
Riyaaz Amalani, CEO, Impressario, Entertainment and Hospitality, which operates Social and Smokehouse Deli, said, he was working closely with ONDC and is looking build channels to increase our reach to consumers. “It has taken us years of hits on the bottomline. Restauraters don’t have deep pockets to take a hit on margins,” he said.
Amlani explained that currently the cost of delivery is Rs 22 for 5 kms. “That is what you will pay the delivery guy. ONDC is coming through delivery apps. Once we start creating our own delivery through ONDC, then we can do on-demand delivery,” he said.
Explaining the model he said: “This is a triple D model. It’s not just delivery cost, but also discovery cost which means that you are paying to be visible in a carousel, to be visible in one of those collections. You easily spend about 12% more on that. On top of that, your average discounting is at 14-15 percent. If you don’t discount, customers don’t come to you. That’s the way it has been gamed… So, 55% of your margin is taken by aggregators.”
The restaurateurs told Kamath they intend to build channels and competencies. “We have nothing against aggregators. We appreciate they have helped build demand which is not competing with the restaurant business. While they have done that, they have taken away any hope of margins,” Amlani said.