Zomato faces heat as restaurant owners logout from deep discounts

Online food delivery and restaurant booking platform Zomato founder and chief executive Deepinder Goyal took to social media platform Twitter, requesting restaurant owners to stop the #logout campaign. 

Our thoughts on the restaurant industry’s stand against deep discounting –⁰

1 - Zomato Gold has been a major hit, but we understand that bargain hunters have also joined Zomato Gold and they are hurting some segments of the restaurant industry very badly.

— Deepinder Goyal (@deepigoyal) August 17, 2019

The move is in response to the campaign started by the National Restaurant Association of India (NRAI), an industry body, over deep discounting practices by restaurant aggregators, booking and delivery platforms. 

“In the interest of consumers, we request restaurant owners, to stop the logout campaign, and have a collaborative discussion with internet aggregators for finding a sustainable way forward,” Goyal tweeted.

He also said the platform will rework the terms of its paid membership programme for Zomato Gold to help restaurants cut losses.

“Somewhere, we have made mistakes and things haven’t gone as planned,” Goyal said.

The logout campaign targeted at restaurant aggregators, booking platforms and membership-driven dining companies including Dineout, Nearbuy, Magicpin and others has seen 300 restaurants in Gurugram pulling out of Zomato. 

 The #logout programme has seen exits of over 1,000 restaurants, Mint reported.

The association said dine-in sales have been hit due to the deep discounts and asked for restoring input tax credit under the goods and services tax (GST). 

“As of now, less than 1% of the restaurant partner base of Gold has supported the challenges raised by the NRAI earlier this week,” an official spokesperson of Zomato told TechCircle. “We are actively engaging with our restaurant partners to discuss and resolve any issues that they might have and we continue to sign up new restaurants on Gold to bring more choice to users.”

Zomato Gold, launched in November 2017, offers complimentary food and drinks for a fixed price annually for the members. In February, the Alibaba- backed food technology player said that it was looking to grow revenues for the subscription programme, including launches in new cities in India and globally.

The company reported 12% contribution from the Zomato Gold membership to its revenue for the financial year 2017-18 from a user base of 700,000 paid subscribers. 

In a bid to streamline spending, Zomato recently downsized its customer support staff and was also in the news for revising commission structures for delivery personnel in certain geographies, leading to a strike by the employees in Kolkata. The company also rolled back its loyalty reward programme for customers called Piggybank recently. 

Another industry body, Federation of Hotels and Restaurants Association of India (FHRAI) has said in a letter to Zomato, Swiggy, Nearbuy, Dineout Prius Heights, EasyDiner and Magicpin that it has noted unethical business practices by these platforms and has called for a review of all their schemes.

Representatives from food aggregators and dine-in membership services companies were called for a meeting by the department for promotion of industry and internal trade (DPIIT) in July to discuss predatory pricing and deep discounting, leading to violations of norms set down in Press Note 2 by the department.