Zomato puts restaurant loyalty program on hold

After shutting down key verticals such as grocery and nutraceutical, Zomato has now put its restaurant loyalty program on hold citing restrictions on dining out due to the pandemic.

"After listening to your feedback and considering the ongoing dining restrictions, we have decided to postpone the launch of the restaurant loyalty program. We'll come back to you with even a better version of the program at the right time," Zomato said in a letter shared with the restaurant partners a few weeks ago.

Interestingly, the development happened following lack of interest shown by restaurants given that it involved another layer of discounting which needed to be offered to the customers.

The National Restaurants Association of India (NRAI) in an advisory issued to restaurants a while ago also warned them of how this new program was nothing else but a modified version of Zomato Gold, an offering which had created huge differences between the restaurant owners and Zomato a couple of years ago.

The Zomato Gold was launched in November, 2017 as a dining only program with the promise of matching premium customers to a curated set of premium restaurants. These targeted premium customers were based on their spending habits, who would have to pay a fixed fee annually to Zomato to be a part of the program. Restaurants would bear the cost of the discount.

However according to NRAI, all of this played out very differently on the ground.

The membership was sold to every customer, unlike what the promise of premium customers. This resulted in deal hunting drives which eventually saw a lot of restaurants logging out of Zomato.

This new initiative of loyalty program was again taken with a pinch of salt by the restaurant owners. This eventually seem to have led to the company deciding to hold the project.

This news was first reported by CapTable.

The development also comes soon after the company witnessed the sudden exit of co-founder Gaurav Gupta, who was the face of Zomato during the run-up to the initial public offering (IPO), leading discussions with the investors and the media.

“Their (Zomato) every business aspect is public market monitored now. Whatever is making business sense for them they will continue and whatever not will be shut down. Majority of the bigger names are not part of this program.  We are not for deep discounting at all. Our biggest form of loyalty is the right form of service. Even if we ever run a loyalty program we would rather do it direct rather with a third party platform like Swiggy or Zomato,” Sagaar Daryani, vice-president of NRAI told Moneycontrol.

Meanwhile, Zomato, which was listed on the stock exchanges in July, reported a net loss of Rs 356 crore during the quarter ended June 30, 2021, compared with a net loss of Rs 99.8 crore in the like period of the previous financial year.

Revenue rose to Rs 916 crore during the quarter under review, a massive jump from Rs 283.5 crore reported in the year-ago period.