The move, Chaddah said, would help the firm wipe out the remaining competition once and for all. However, analysts and rivals, who did not want to be quoted, questioned the zero-commission model and wondered if Zomato could meet its operational profitability target for the year.
The firm currently charges 10-15 per cent commission per order. The commission is charged according to the rating of the restaurant. If the rating is high, the commission is less and vice-versa.
Explaining the logic behind bringing the percentage of commission charged to the 12,000-odd restaurants on the platform in India to zero, Chaddah said: “We have broken even in India and five other countries. Now we want to wipe out the competition. While others are pushing their merchants to increase the commission, we will do the opposite, which will eventually lead to all these restaurants abandoning other portals.”
According to the firm, online order and delivery is only four per cent of its total revenue and the rest is from search, advertisements and its ‘whitelabel platform’ – a suite of technologies for restaurants to run their business on the internet.
He added while Zomato’s competitors charged low commissions initially to add more restaurants to their portfolio, now with most of these companies bleeding, they are now demanding higher commission. In terms of value of orders, it claims to be the market leader, but not in volume terms. While Bengaluru-based Swiggy is giving competition to the firm now, Foodpanda has been a leading player in the space. According to reports, Rocket Internet-backed Foodpanda was on the block, but its CEO denied it recently.
Zomato had always been against deep discounting. “From asking for just five per cent commission and offering discounts on food, they (competition) are now asking for 15-20 per cent commission. We, on the other hand, never had any discounting schemes and always charged 10-15 per cent in commission,” Chaddah added.
The Zero Commission Scheme could kick off in March after a decision is taken by this month-end. However, the scheme would not be a permanent fixture but would run for some time. “This would hit our competitors badly.”
Source: Business Standard