Friction between HoReCa operators and food aggregators intensifying in India, says GlobalData

Indian food service operators and food aggregators have been at loggerheads for years over the latter’s commissions, lack of data sharing and policy changes. Even as online food orders have surged, the rift between the two continues to widen over a new clutch of issues including a new cancellation policy, and the recent Goods and Services Tax (GST) reforms. Rather than realizing the significance of the synergies through strategic collaboration, HoReCa operators and food aggregators are further escalating their friction, much to the loss of consumers, says GlobalData, a leading data and analytics company.

Bobby Verghese, Consumer Analyst at GlobalData, comments: “Owing to multiple and prolonged pandemic-related lockdowns, and the partial/complete restrictions of HoReCa outlets, consumers began ordering – food deliveries and takeaways in greater numbers, or more often, for convenience and safety. Despite the lockdowns being lifted, a sizable chunk of consumers is still ordering food online as revealed by GlobalData’s Q3 2021 consumer survey*.”

While both restauranteurs and food aggregators are benefitting from the surge in online orders, HoReCa players argue that a chunk of their profits are eroded by the high (30%–40%) commissions charged by food aggregators. Moreover, HoReCa operators resent the lack of access to the rich consumer database that food aggregators have accumulated from the food purchased through their venues.

A fresh conflict arose in mid-2021 as Zomato unveiled a new cancellation policy, restaurants that cancel customer orders frequently will be charged a penalty or be temporary delisted from the Zomato app/website. The National Restaurant Association of India’s (NRAI), an association of over 500,000 restaurants filed a complaint with the Competition Commission of India against the purported anti-competitive policies of food aggregators.

Furthermore, the central finance ministry amended tax laws, requiring food aggregators to pay 5% GST on behalf of restaurants for all online orders, beginning from January 1, 2022. While this will have no impact on food ordered through GST-registered restaurants, prices of food from unregistered eateries will escalate, rendering them less competitive in the digital landscape. While the latest GST amendments intend to bring the unorganized foodservice sector under the tax radar, it can inadvertently alienate small-scale eateries from the online food delivery space.

Mr. Verghese concludes: “The uneasy alliance between restaurateurs and food aggregators will continue as each party has its own domain of expertise that the other cannot compete with. Apart from multinational chains such as Dominos and KFC, most restaurants lack the deep pockets to commence an independent online delivery service. Moreover, HoReCa operators will find it difficult to match the rich customer experience  offered by aggregators.”

*Data taken from GlobalData Q3 2021 Consumer Survey – India with 567 respondents, published in September 2021

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