Deep discounting, data masking and hefty commissions are brewing a rebellion against online aggregators
Everyone seems to be taking the #10YearChallenge. Not me. For me, it is not about how much I have changed but rather how my life has. Perhaps the most impactful ten-year change is the way technology has disrupted almost every aspect of our lives. I often find myself explaining to my mother how I can track in real time the food delivery boy or the cab that I have booked just by looking at the little icons on the apps. It is simply fascinating to think that a decade ago, this entire tech revolution that has imbued itself into our daily lives, just did not exist! And, yet, here we are today, both consumers and businesses alike, completely dependent on these tech platforms. While these startups provide customers with greater ease of daily living, businesses have benefitted immensely thanks to the platforms' phenomenal reach.
In the last few years, technology startups such as Amazon, Flipkart, Uber, Ola, Swiggy, and Zomato, have metamorphosed the various sectors that they operate in. While traders initially picked up the cudgels against e-tailers such as Amazon and Flipkart, they too were forced to embrace the online selling space. Digitisation and extensive outreach given by technology helped them magnify sales. But today, scores of small and mid-size businesses across the spectrum complain that what started as disruption of the market is now threatening the market itself. Deep discounting, heavy commissions and skewed tech algorithms are hitting the models of otherwise sound businesses.
Take, for instance, the online food delivery sector. The onset of food delivery platforms had initially helped food businesses prosper. The entire hassle of maintaining one's own delivery crew was simply outsourced to Swiggy. Then came other players such as Zomato, FoodPanda and UberEats. With more competition, the platforms, who anyway charge hefty commissions between 20-30 per cent, started pushing huge discounts. With the aim of undercutting one another and increasing customer acquisition, the quantum of discounts also increased. Most of these platforms are currently pushing their restaurant partners to offer discounts up to 50 per cent! While they absorb some of this discount, the lion's share still comes from the restaurant partners. Swiggy and Zomato are able to make up for their discounts with their commissions and additional earnings coming from advertisements. Restaurant partners, however, see their monthly outgo increasing exponentially and actual earnings dwindling. Not participating in these promos means that restaurants will hardly be visible on the platforms, leading to a loss in sales.
Most e-commerce players in India focus on increasing their GMV (gross merchandise volume). Simply put, the greater the number of transactions on their platforms, the better is their valuation. The startups with their numerous rounds of funding are flushed with cash that is diverted to meet these deep discounts. While the monies from the VCs ensure that these startups improve their valuation while offering huge discounts, the vendors and partners that they have aggregated on their platform suffer losses as they have no such safety net. Adding to this is the complete change in consumer behaviour. The Indian customer reacts to discounts and sales more than ever now. And, in looking for the cheapest deal, they are prepared to sacrifice quality more often than not. Small and medium businesses are often unable to keep pace with the online aggregators' deep discounts or the consumers' discount-addiction.
Taxi unions and cab drivers, that were always more influential, fought this disruption of their business and eventually made Ola, Uber and state governments pay heed to their demands. Now, there is a rebellion brewing in the food industry as well. Saddled with high commissions, restaurants in Kochi have already banned food delivery apps. Over 500 restaurants have blacklisted Swiggy in Gujarat. An online petition has reached the Competition Commission of India (CCI) and the Prime Minister's Office (PMO) while the National Restaurant Association of India (NRAI) has raised its concern over the issue of deep discounting and data masking. Surely, there can be a middle ground that can benefit both the aggregators and their partners, where technology still disrupts but is for the greater business good for all.
(The author is a journalist and media entrepreneur. The views expressed are strictly personal)