7 Reasons why Zomato/Swiggy killing the restaurants industry in India

Zomato and Swiggy have become household names in the food delivery industry and dine- in, offering convenience to customers and expanding market reach for restaurants. However, these platforms come with significant drawbacks, particularly concerning marketing and profitability. Here are seven compelling reasons why a restaurant should consider banning Zomato and Swiggy from a marketing and profitability standpoint.

1. High commission fees erode profit margins

The most immediate impact on profitability comes from the high commission fees charged by Zomato and Swiggy. These fees typically range between 20-30% of the order value. For many restaurants, especially smaller ones, this can make it difficult to achieve sustainable profit margins. These fees reduce the net revenue per order significantly, forcing restaurants to either increase prices, which can deter customers, or absorb the costs, which erodes profitability.

2. Loss of direct customer relationships and data

When customers order through Zomato or Swiggy, restaurants lose direct interaction with them. This loss of connection makes it challenging to build loyal customer relationships and gather valuable feedback. Additionally, Zomato and Swiggy control the customer data, limiting the restaurant's ability to analyze purchasing patterns, preferences, and feedback. This data is crucial for creating targeted marketing campaigns, improving service, and fostering customer loyalty.

3. Dilution of brand identity

On Zomato and Swiggy, the restaurant’s brand is just one among many options presented to the customer. The unique identity of the restaurant can get lost amid the plethora of choices. Moreover, any issues with the delivery experience, such as delays or food quality problems, reflect poorly on the restaurant, even if the fault lies with the delivery platform. Maintaining a distinct brand identity and ensuring a consistent customer experience becomes significantly more challenging.

4. Unfair competition and market saturation

The presence of numerous restaurants on these platforms creates intense competition. Newer or smaller restaurants find it hard to stand out against established chains and those with larger marketing budgets. This often leads to price wars and the need for frequent discounts to attract customers, further squeezing profit margins. Restaurants are forced to compete on price rather than the quality of their food and service.

5. Pressure to offer discounts and promotions

Zomato and Swiggy often push restaurants to participate in various promotions and offer discounts to boost visibility on the platform. While these promotions might temporarily increase orders, they typically result in lower profit margins. Constantly offering discounts can also devalue the restaurant’s brand and make it difficult to attract customers at regular prices once the promotions end.

6. Operational strain and quality control issues

Managing a high volume of delivery orders alongside dine-in services can strain kitchen operations and staff. Ensuring consistent food quality for delivery orders is challenging, as factors like travel time and handling can affect the food’s condition upon arrival. Any decline in quality can lead to negative reviews, harming the restaurant’s reputation and making it harder to attract repeat customers.

7. Reduced focus on dine-In experience

For many restaurants, the dine-in experience is integral to their brand and profitability. Focusing too much on delivery can detract from the quality of the in-house dining experience. The ambiance, service, and presentation of food are critical aspects that cannot be replicated through delivery. By prioritizing dine-in, restaurants can provide a superior experience that fosters customer loyalty and encourages word-of-mouth referrals.

Conclusion

While Zomato and Swiggy provide convenience and a broader reach, the marketing and profitability drawbacks are significant. High commission fees, loss of direct customer relationships, brand dilution, and intense competition all contribute to reduced profitability and weakened brand identity. By banning these platforms, restaurants can regain control over their marketing, build stronger customer relationships, and focus on delivering a superior dining experience that drives long-term profitability. Investing in direct marketing strategies, loyalty programs, and enhancing the dine-in experience can ultimately lead to a more sustainable and successful business model.