Food delivery platforms step up discounts to grow market
Cash-rich online food delivery companies have raised discounts and cut delivery charges to win market share in an increasingly competitive market, analysts and industry experts said. The offers are led by delivery platforms Swiggy, Uber Eats, and Zomato, as well as restaurants debuting on them.
In February, Zomato raised $200 million in a fund-raising round led by Ant Financial, and Swiggy raised $100 million led by Naspers. Both companies, which are in talks to raise more cash, are facing competition from Uber’s food delivery service Uber Eats, started in May 2017.
Uber Eats started with free deliveries for new customers, and later started providing restaurant and city-based promotions. Swiggy, on the other hand, has cut delivery rates for everyone, and tied up with Indian Premier League (IPL) to offer match-day discounts. Zomato is also offering match-day discounts along with city-specific discounts in Hyderabad and Chennai.
Bhavik Rathod, head of Uber Eats India told Mint that its restaurant partners had expressed interest in discounts, and that the company’s biggest spends were marketing expense in the first few months after launch.
“Discounting for us is more restaurant-wise, and it will be there on our platform for some time. It’s a desirable strategy while operating a marketplace model. Such a model only succeeds when you have liquidity, which means you have to grow all three sides of the marketplace (supplier, user, and delivery per- son) really fast, and if you don’t, one of them falls behind,” said Rathod.
According to Sreedhar Prasad, partner at KPMG Advisory, whenever a new restaurants lists on food delivery platforms, discounts are more out of the restaurant’s need to acquire customers. He added that the platform may also bear a part of the discount offered by restaurants.
“When it comes to new platforms (like Uber Eats,) they have to provide discounts, because the restaurants they list will also be listed in other established platforms… In this case, the money spent is more for customer acquisition rather than discounting,” added Prasad.
Although discounts on food orders are here to stay, analysts believe free delivery offers may be phased out. “Free delivery will go out in a phased out manner as seen in the case of e-commerce marketplaces. For matured markets (metro cities), smaller orders might be charged, and bigger orders might have lower or free delivery charges,” said Anil Kumar, chief executive, RedSeer Consulting.
BENGALURU: