ONDC - Unleashing a Price War In The Online Food Delivery Industry

The Online Food Delivery Industry has been a battlefield for a recent while, with restaurants struggling to retain their profitability against the high commissions charged by Zomato and Swiggy. The common practice of providing things with excessive costs to make up for the large commissions charged by Zomato and Swiggy is one of the main reasons for this battle.

On the other hand, an open network ONDC is shaking up the online food delivery industry with the eradication of these challenges and less commissions. 

ONDC, Open Network for Digital Commerce, is a game-changing initiative that intends to create an open and seamless digital ecosystem for numerous industries, including the online food delivery industry. It makes it possible for restaurants and logistics partners to work in sync and increase efficiency across the whole supply chain. 

One of the major challenges faced by restaurants in current times is the high commissions charged by these food delivery platforms. The commissions charged by the two aggregators have risen drastically from 2-5% to 18-24% of the average order value. This substantial increase has offered an unfair edge or advantage to these players which increases the struggle of restaurants to survive. However, with an open network like ONDC, restaurants can cut down unwanted costs associated with customer acquisition and connect with their customers directly. This clearly eliminates the dependence of restaurants on food delivery platforms like Zomato and Swiggy.

Restaurant owners often feel that have no choice but to offer their products at excessive rates in order to balance the hefty commissions charged by these food delivery apps. But with ONDC. restaurants can confidently list their items at their actual pricing with low commissions and further forward the benefits to the end customer. Moreover. ONDC’s approach to free delivery charges has already begun attracting customers who are happy to save on unreasonable delivery charges. 

The inability to access customer data is another challenge faced by restaurants. A substantial database of millions of users has been compiled by Zomato and Swiggy. However, these aggregators do not feel the need of sharing this data with their restaurant partners. As a result, restaurants are not aware of their end customers regardless of serving them for years. Due to this lack of a database, it has been difficult for restaurants to better understand their customers’ preferences and provide them with tailored services.

When it comes to online food delivery services in India, Zomato and Swiggy hold a great duopoly. They are now aggressively criticized for the middlemen commissions that increase the price of a particular item. In the same picture, ONDC comes to break the duopoly of these big players by completely eliminating the middleman between the restaurant and the end customer. 

Additionally, Swiggy’s recent introduction of a platform fee of Rs. 2, to be charged by end customers for all orders, has further highlighted the gap between ONDC and Swiggy’s pricing models. With this move, the price competition in the online food delivery sector has been further fueled. While platforms like Swiggy continue to charge hefty commissions and delivery charges, ONDC’s low-commission platform and free delivery charges have made it a popular choice for both restaurants and customers.

Food delivery apps are unjustifiable on the different prices of the same product on different platforms. When a customer walks into a restaurant to order food, they are usually charged the actual price of the item. This actual price involves the food cost and a fair profit margin for the restaurant. However, the price of the same item is inflated when it is listed on Zomato and Swiggy. The price is often inflated to compensate for the higher commission charged by these platforms. For instance, an order which may cost ?212 on Zomato or ?209 on Swiggy, costs only ?147 on ONDC (the actual cost of the item).

ONDC has the potential to expand the digital footprint of restaurants, drive innovation, promote healthy competition, and improve a clear understanding of their customers. This may break the duopoly of Zomato and Swiggy and allow small players to confidently survive in the cutthroat market, which may also give vast choices to customers. 

Conclusion

With ONDC’s approach to less commissions and free delivery charges, the online food delivery industry is about to undergo a major transition in the upcoming time. This significant evolution will mark affordability and transparency in the new standards for both restaurants and end consumers.

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