Restaurants opting out of hyperlocal delivery platforms

High commission rates and patchy delivery services are prompting many restaurants to opt out from food tech and hyperlocal delivery platforms like Swiggy and Shadowfax, according to reports.

Ashutosh Jha, the associate vice-president for R&D at TGI Friday’s, said, “The basic problem with the industry is that they fail to deliver an experience similar to what we give our customers in the restaurant.”

It has recently closed ties with food delivery players Shadowfax and FastOx. The company, which has 13 restaurants across India, is now working on selective menu for delivery, redesigning their packaging and plans to apply delivery charges on their orders.

Some restaurateurs have also said that the commission fee charged by delivery platforms, has been as high as up to 25% on the price of an order, which makes it unsustainable. The restaurants also complained about delayed pickups, shabbily dressed delivery boys and deteriorating standards of food delivery for their exit.

“Many times we have waited for an hour or two for the delivery boy and had to instead recook the food and send our own staff to fulfill it,” he added.

Bangalore-based restaurant Berry’d Alive has pulled out from Swiggy and Roadrunnr for certain stores and plans to retract completely soon. Aljeesh Siddique, the managing partner at Caboodle, the company that manages Berry’d Alive, said, “Their volumes are increasing at the cost of our walk-in crowd. So their business is not adding to our topline.”

Swiggy and Shadowfax declined to comment.

Many have cut ties with these delivery startups and have resorted to do it on their own. Azure Hospitality, which has restaurant chains Mamagoto, Speedychow, Rollmaal and Mamapaati under its portfolio, now does most of its deliveries itself. They stopped using Shadowfax and Roadrunnr.

A Morgan Stanley report has indicated a growth in the online food aggregation business in India, which could reach to $4.4 billion by 2020, implying a 134% annual growth till then. Undoubtedly, the food delivery market in India is picking up with foodies and restaurateurs getting used to it and the industry is headed for a new challenge – retaining clients.

Experts say that the food tech startups are under pressure to turn profit as the funds are drying up and investors digging for a sustainable business model.

The market is going through a rollercoaster as of now. While Swiggy clocked in a million orders in a month, its closest competitor, TinyOwl, got acquired by Roadrunnr. Smaller player Spoonfed on the other hand has shut its operations in Bangalore to launch their services in Dubai.

It has been a subject of global debate now that whether the marketplaces should take control of logistics or not. The marketplace business model, by its very nature, is high margin and scalable once market dominance is reached. Delivery adds to the cost of transportation and makes the model less flexible and difficult to expand, as it requires a large enough fleet during peak hours.

Delivery services surely have its advantages. A company can expand its network to even those restaurants that don’t offer home delivery by offering them. Another variant being applied by some companies is to have third party delivery companies provide exclusive services to the marketplace, thereby benefiting from both variability of delivery cost and still maintaining control of the delivery experience.

Source- Economic Times