Zomato’s restaurant affiliates in Mumbai have reported a reduction in their delivery range, which they attribute to a shortage of delivery staff in the city. This issue has arisen simultaneously with the food delivery unicorn’s decision to increase the commission charged on the average order value.
On the evening of April 28th, Pankaj Kumar (Name Changed), who owns a restaurant in Mumbai, took to Twitter to report that Zomato had reduced his restaurant’s delivery radius to four kilometers. The reason for this action was due to his refusal to comply with Zomato’s demand to increase commission on the average order value. Kumar went on to state that he has seen a significant increase in direct orders over the last three days, and customers have started reaching out to him directly through his restaurant’s website, which is powered by the online ordering and digital payment app Uengage.
Pankaj Kumar said, “Zomato has been trying to reach out to us for the last one and a half months to increase the commissions on average order value. When I refused, they gave an indication that our visibility could be impacted.”
Bansi Kotecha, Co-founder of Kytchens, a Mumbai-based cloud kitchen startup, has reported facing the same issue as other restaurant partners of Zomato. He has been struggling with this problem for more than a week.
“Delivery executives are not available and most of the time my restaurant is either shown as temporarily or permanently closed,” Kotecha says.
As per Kotecha, who oversees seven cloud kitchens under his brand, Zomato has reduced its delivery radius from 5-7 km to 3-4 km. Upon contacting Zomato, they acknowledged the problem and assured him that they would bring it to the attention of higher officials in the company.
On the other hand, Kumar’s experience seems to be different.
He used to split the discounts provided to Zomato users with the company. According to him, 80% of the discounts were paid by him, while Zomato covered the remaining 20%. However, during the recent commission talks, when Zomato demanded a raise in commissions, Kumar declined and instead offered to bear the entire discount amount as compensation.
For the past three days, Kumar has been receiving calls from his regular customers who are unable to place orders from his restaurant. Due to the constant complaints, he decided to contact Zomato to discuss the issue.
“They informed me that they have reduced the service radius to 4 km. When I asked for official communication (via email), they stopped responding to my WhatsApp texts. I am yet to receive any official email confirming the same,” said Kumar.
In March, Zomato not only raised commissions on food-delivery orders but also encouraged restaurants to increase their advertising spending on the platform. However, the question remains – does this approach actually prove beneficial for the restaurants?
Kumar’s attempt to increase ‘menu opens’ on Zomato by investing in promotions did not yield the desired results. ‘Menu opens’ is a feature that promotes select restaurants to increase user engagement with their menus.
For instance, if Kumar recorded 10,000 organic menu openings in a month and spent money for 2,000 menu openings the next month, the total openings would end up being the same. “Whenever I bought menu openings, my organic numbers would decrease,” he revealed.
Food delivery companies are struggling to cope with the recent business slowdown. According to a report by the Economic Times, Swiggy has started charging platform fees for its food delivery services. Meanwhile, Zomato is focusing on profitability by engaging with its partner restaurants to increase the commission rate based on the average order value. The extent of the commission increase varies from restaurant to restaurant.
Shaurya Malwa, the co-founder of Nho Saigon, a Vietnamese bistro, and The Canary, a mead taproom, reported no problems with delivery as his restaurants primarily focus on in-house dining. However, he expressed concerns about Zomato’s rising commission rates.
“The negotiation (with Zomato) starts at 20%, gradually decreasing to 18, 12, 10%,” he said.
Kotecha has been requested to raise the commission by 25%. He is currently in the process of renegotiating the terms of the contract and commission. Kumar, on the other hand, has been asked to raise the commission by 2%.
The majority of restaurant owners in Mumbai have reported a reduction in delivery radius. However, it remains unclear whether Zomato is deliberately reducing serviceability for restaurants that refuse to increase commissions, or if it is simply a coincidence.
“I am not very sure if the two are correlated. Every summer there is a dip in the supply of delivery executives (owing to the heat). That could be one of the reasons for the decreased delivery radius,” Kotecha says.
According to another restaurant owner, last week’s shortage of delivery personnel could be attributed to an increase in food orders during Eid celebrations and staff taking leave. The same owner reported encountering a similar issue with Swiggy. Kumar also stated that the number of orders for his restaurant has significantly increased in the past few days.
When contacted, Zomato did not provide a comment.
