ONDC has gained popularity as a cheaper alternative to Swiggy and Zomato due to its discounts and free delivery services. Nevertheless, the noticeable difference in price between these platforms is expected to reduce in the coming days.
Read More: ONDC sparks price war, threatens Zomato and Swiggy dominance in food delivery space
ONDC has recently informed the seller-side applications on their network that the subsidies provided for delivery costs to customers will now be subject to a cap. This new cap became effective from May 9th.
With ONDC experiencing a surge in orders, with food and grocery orders peaking at 25,000 over the weekend, the company sent a communication to seller-network participants on May 7th, outlining several changes.
Until now, ONDC was providing buyers with a logistics discount incentive of up to INR 75 on every eligible order. However, with the latest amendment to the clause, ONDC has introduced two new additional conditions.
Under the new clause, the incentive will now only be applicable up to a maximum limit of INR 225,000 per seller-side app per day, and a maximum incentive of INR 3,750 per seller per day.
Initially, the incentive provided by ONDC came with specific requirements, which mandated seller-side apps to offer “zero delivery charges” for all hyperlocal deliveries and reduced charges for inter-city delivery. Additionally, ONDC expected buyer apps to communicate the availability of free delivery to the buyer as early as possible during the buyer journey to boost demand.
Consequently, this resulted in customers being exempted from delivery charges for the majority of hyperlocal orders.
However, effective May 9th, this clause has been removed.
Consequently, buyers may now begin to observe delivery charges for certain restaurants and grocery outlets, particularly if these sellers have surpassed the cap set by ONDC.
Furthermore, the price gap between ONDC and Swiggy-Zomato, which had previously been as high as 50%-60%, is expected to diminish with these recent changes.
Read More: Brokerage firm Motilal Oswal dismisses immediate threat to Zomato from ONDC
Although ONDC officials have refrained from commenting, sources have revealed that the network had always intended to introduce these caps, as the initial discounts were primarily intended to draw in consumers to the platform.
ONDC has so far been funding these discounts and has raised around INR 180 crore from multiple institutions and banks such as State Bank of India, Kotak Mahindra Bank, Axis Bank, HDFC Bank, and ICICI Bank.
In an effort to encourage participation, ONDC has been providing numerous incentives to its participants.
According to sources, ONDC has also been offering an incentive of INR 50 to buyer-side apps like Paytm and Pincode, to provide a comparable discount to customers on orders over INR 100. This incentive was also capped at 2,000 orders per day. Additionally, ONDC has been providing various other incentives and rewards to increase buyer-side demand and attract more merchants to the platform. However, these incentives are expected to be gradually phased out as the network grows in scale.
Despite the recent changes, it is expected that the cost of food items on ONDC will still be significantly lower than that of its competitors. This is because seller apps on ONDC are only charging restaurants a commission of approximately 2%-3%, whereas Zomato and Swiggy typically charge commissions ranging from 20-30%.
Restaurants tend to raise the prices of their menu items while listing them on Swiggy and Zomato due to the high commissions charged by these platforms.
