Zomato on ONDC: ‘Continue to watch progress closely, and learn from it’

Swiggy and Zomato control over 90 percent of India’s food delivery market, which is worth $5 billion.

In what is the first reaction from one of the largest food delivery players on the Open Network for Digital Commerce (ONDC) believed to threaten their duopoly, Zomato said it welcomes all innovations that can help the restaurant industry grow in India.

“At Zomato, we welcome all innovations that could help the restaurant industry in India grow. We continue to watch the ONDC progress closely and learn from it,” said Chief Financial Officer Akshant Goyal in the company’s letter to shareholders as it announced its numbers for the final quarter of FY23.

This comes after questions were raised if ONDC would end the duopoly that Zomato and Swiggy have created, as price comparisons started floating online, showing that ONDC had worked out to be cheaper. Swiggy and Zomato control over 90 percent of India’s food delivery market, which is worth $5 billion.

Read: Zomato Q4 result: Food delivery gross order value shrinks after exit from 225 cities

Open Network for Digital Commerce — or ONDC — is a first-of-its-kind experiment by the government for interoperable e-commerce which would give companies more control over their business decisions.

However, an analysis by Moneycontrol showed that the price differential came primarily from discounts that had been offered. The analysis found that just like Swiggy and Zomato, the seller-side apps on ONDC offer discounts, and this is coupled with the network itself giving out discounts of Rs 50 to attract new customers.

In fact, ONDC’s retail orders fell by over 50 percent last Sunday compared to the week before as discounts on delivery were drastically curtailed thanks to a revision of incentives disbursed by the network.

Multiple analysts have also said that ONDC is unlikely to dent the market share of Swiggy and Zomato. A report by Jefferies said that the discounts and lower delivery charges offered by ONDC-enabled platforms cannot continue. The analysts noted that the delivery subsidy of Rs 75, which is limited to Rs 2.25 lakh per seller app per day and translates to Rs 125 per order, is unsustainable.

JM Financial too flagged that ONDC, in its current shape, isn’t a threat to any player's business.

“There has been a hue and cry of late...many believe that restaurants on the (open) network will be able to offer better prices to customers. Hence…ONDC can disrupt the online food delivery market as it has the potential to emerge as a formidable third player… We, however, strongly disagree with many of these assertions. ONDC in its current shape and form is nowhere close to shaking up the online food-tech industry,” the JM Financial note said.