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Thursday, March 23, 2023

Zomato wants more commission from restaurants

News ECG: After Zomato decides to raise its commissions by a few percentage points, restaurants are getting ready to launch a massive reaction against the meal delivery service.

According to sources with knowledge of the situation, the meal delivery service has lately begun to renegotiate its terms with several restaurants across cities to increase take rates and profitability in a low-growth market.

The commissions had been kept lower up until this point to help them get through the pandemic blues and support newly established online eateries in making the changeover to meal delivery, according to sources, which was Zomato’s justification for approaching the businesses.

Because of these factors, it usually provided pricing that was 4–6% less expensive than Swiggy, a competitor. Yet restaurant owners aren’t willing to accept such justifications. Any agreement is always between two parties exclusively.

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“Is Zomato prepared to revise upward for other businesses where it is lower than Swiggy if it wants to change its pricing downward in circumstances where it may be higher than Swiggy?” inquired the owner of a restaurant in Mumbai.

“This action reeks of cartelization if they aren’t willing to go both ways. We could have to take legal action again, “He went on. Undoubtedly, Zomato and Swiggy do not charge eateries the same prices. The commission structure may be in the range of 15 to 30 percent, depending on elements like order volume, average order value, a restaurant’s brand power within its category, and the services it utilizes, among others.

According to a restaurateur from Bangalore, it is not like eateries are making a lot of money, and many are still working to make up for the difficulties experienced during the pandemic. “Aggregators cannot raise prices at this time, and there will be significant pushback. Some have also been threatened quietly with the possibility that their platform’s visibility will suffer if they refused to accept the increased costs “He went on.

For the next month, Zomato plans to renegotiate the terms, according to a source familiar with the situation. As more restaurants use its advertising and B2B grocery service Hyperpure, the effective commission rate from the perspective of the restaurants will decrease.

Zomato has 209,000 active eateries listed on its website by the end of the December quarter, an increase from 191,000 a year earlier. When asked about the matter, a Zomato spokeswoman responded, “We constantly examine our commissions to ensure that they are fair and sustainable for both Zomato and our restaurant partners.

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