Swiggy may cap its share at 25% of the total bill

Swiggy may cap the commissions it charges restaurants at 25%, two people with knowledge of the company’s plans said, in a potential sign of a thaw in an ongoing impasse between food delivery companies and a restaurant owners’ body.

The move comes right after the Bengaluru-based food delivery company met with the National Restaurants Association of India (NRAI) last week to resolve the impasse.

Swiggy’s decision will benefit small business owners, who do not have the leverage to seal better deals due to the inability to process larger volume of orders.

“Compare this to large chains, which sign ironclad agreements because they have the capability to furnish larger volumes,” said one of the people.

A Swiggy spokesperson told ET, “Commissions are a range, depending on various factors. Keeping these factors well defined and transparent, Swiggy has always worked with commissions that are mutually agreed upon and create a win-win with our restaurant partners.”

The spokesperson, however, said the 25% cap was “speculative”.

Recently, a Hyderabad-based hotels association said that most restaurants in the city were willing to go off online food delivery platforms, if the commissions were not capped and discounts not done away with.

Swiggy’s move will mean a temporary loss of revenue, as several restaurants who have signed deals with the company earlier give commissions of nearly 30% of the order value. “It can be easily made up via ads for now and other revenue verticals such as Stores later,” said one of the people mentioned earlier.

A cap on commissions was discussed at the NRAI meeting last week, but the restaurants’ association had insisted on a matrix-like structure.

“We spoke about a tier-based structure that would depend on average order value and the number of orders,” said one of the people who attended the meeting with the NRAI.

Officially, NRAI has asked Swiggy to come back with a revised proposal in 14 days.

“Our commissions are in accordance with the industry average and take into consideration the quality of services we provide both consumers and restaurants,” a Zomato spokesperson said in an email, adding the company had a detailed meeting with NRAI where all issues were discussed.

Over the last few years, both Swiggy and Zomato have aggressively focused on acquiring new customers and driving customer repeats. They have managed to do that by offering services such as free delivery, and partly funding discounts. On the restaurant side, both companies have significantly increased their take (commissions) to as high as 30% from a low 5%.

Apart from commissions, NRAI also asked Swiggy and Zomato to unbundle their services.

Both companies have, however, stayed quiet on unbundling services.

Initially, when Zomato introduced online orders, it kept food delivery restricted to partners who could make their own delivery. Swiggy, meanwhile, is working on technology that will enable restaurants to accept and make their own deliveries if they so choose.

Source:- https://retail.economictimes.indiatimes.com/news/food-entertainment/food-services/swiggy-may-cap-its-share-at-25-of-the-total-bill/70941794