Food aggregators making consumers discount addicts, says restaurants body

After the e-commerce sector, food aggregators like Swiggy and Zomato have come under fire for offering deep discounts and cashback, with the National Restaurant Association of India (NRAI) inquiring if these startups are making customers 'discount addicts'.

The restaurants' body said it has flagged issues regarding misuse of dominant position by these companies in a meeting with teams of app-based firms like Swiggy, Zomato, Foodpanda and Uber Eats.

"Concerns of the standalone and chain business operators regarding deep discounting, data masking, right to use own logistics, private labels and ad hoc campaigns were put forth in this meeting," NRAI President Rahul Singh said in a statement.

He said concerns have been well taken and the meetings would be made bi-monthly to improve communication between the industry body and the aggregators.

"There is no doubt that the aggregators have created a platform to bring restaurants closer to the customer through the benefit of digitalisation, but is it making the customers 'discount addicts' under the guise of 'customer is winning?' One can't sell at a loss to attract customers, distort competition and create dominance through capital dumping," NRAI President Rahul Singh reportedly said.

Another concern raised in the meeting was the government's new FDI policy on e-commerce. The parties also discussed whether control of inventory stays with the marketplace or if the apps are allowed to give preferential treatment to their own non-restaurant private labels and cloud kitchens.

Standalone restaurants and chains have approached the industry body accusing food aggregators of offering prices and discounts that were unfair and discriminatory in nature. "The restaurant industry consists of lakhs of small businesses, mostly run by small and family entrepreneurs, and their interests need to be kept in mind while looking at this issue," Singh added.

It remains to be seen how a change in discounting methods will impact India's online food delivery market, which is growing at a rapid pace due to digitisation and rise in internet penetration. These food ordering and delivery startups are attracting funds from Indian and overseas firms. Swiggy recently raised $1 billion in fresh capital from Naspers and China's Tencent, while Zomato was reportedly in talks with firms to raise $400 million.