The Boy Who Cried ‘Monopoly’: Why NRAI’s Fight Against Zomato & Swiggy Rings Hollow

NRAI’s allegations of 'unfair competition' against Zomato and Swiggy reveal more about the restaurant lobby's insecurities than real competition concerns.

I’ve seen my Zomato and Swiggy stocks plummet for weeks now, and it doesn’t surprise me anymore. Part of it is, of course, because of the sluggish growth in private consumption. However, being a tech startup that innovates in an unregulated space has its own challenges, peculiar for these roadblocks are put in place by upstarts that have been enabled by you but are now dissing you in public. India’s food aggregators—Zomato and Swiggy—have snakes in their backyard. And they’re biting back at aggregators that have afforded them discovery of a level unimaginable through pure retail. The National Restaurant Association of India (NRAI) says it will approach the Competition Commission of India (CCI), again! It seems the motley group of ‘restaurateurs’ that comprise the NRAI are secretly harbouring ambitions of gaining lateral entry into the babudom.

This time, the Restaurant Association has accused Zomato & Swiggy of abusing their dominant position in the market as aggregators, with data collected from millions of customers, to launch their own cafés that will compete directly with restaurants. These cafés—Zomato-owned Blinkit’s Bistro and Swiggy’s Snacc—operate as standalone mobile apps, and come with a ~10-minute delivery promise, thus bringing ‘cooked’ food into the basket of offerings now under the quick commerce umbrella.

Here, it’s important to notice the attempt to complicate stuff and the alarmism on display.

The Association believes that Zomato & Swiggy might use their customer data—which they collect when a customer orders from a restaurant through their app—to move users to their own brands, Bistro and Snacc, respectively, where they’ll be selling similar products. This presumption that Zomato & Swiggy are looking to undermine the business of their restaurant partners, begs the question—why would both companies look to migrate traffic from their respective parent apps to newer verticals that may or may not work out. Zomato & Swiggy will grow only when their restaurant partners see growth in orders and returning users. If a Snacc was actually meant to challenge a restaurant’s business, it wouldn’t have come from Swiggy, which is rooting for the restaurant industry. The restaurant association plucks out the wrong question and makes it seem like the most obvious question because, hello! Data mining, data intelligence, and AI—all buzzwords. It misses asking itself, what are the incentives for Zomato & Swiggy to take business away from us?

Another way the NRAI makes the simple stuff obscure is by alleging that Zomato & Swiggy are engaging in ‘private labelling’, for they’re shrewd enough to realise that the term will evoke attention. Private labelling got a bad rap in India ever since the term came to be associated with Amazon’s alleged practice of crowding out small sellers on its platform by launching its own rival brands in the same categories. Given the ecommerce giant’s financial muscle, these Amazon-run brands can source products in bulk, cheaply, and sell at competitive prices, thus undercutting small sellers on Amazon. Although, Amazon’s private labels end up sourcing their products from hundreds of homegrown MSMEs, therefore doing more for the ‘Made-in-India’ ecosystem than a single small seller could ever achieve. Even so, comparing the sale of, say, furniture on Amazon by one of its private labels to that of everyday cooked food by Zomato & Swiggy is just disingenuous. A private label works in categories such as furniture, where branding can highlight some USP and help differentiate a product from the competition. It’s difficult to imagine a scheming entrepreneur starting a private label to sell basic low-value stuff such as samosas and sundries, undercutting all the other fast-food outlets in town and running away with a huge profit. Zomato & Swiggy have also made no attempt to claim that their online cafes deliver food that is any different from what’s already out there. The USP here is just the convenience of getting basic cooked food at your doorstep in ~10 minutes, which is more innovation for the customer's benefit than ‘unfair’ competition.

Amazon's private labels have also been accused of creating knock-off products of stuff already selling on the platform. This had implications for MSMEs’ trademarks and intellectual property rights, thus justifying closer scrutiny. By extension, is the NRAI accusing Zomato and Swiggy’s private labels of selling knock-off samosas and rajma chawal? The Restaurant Association hasn’t specified the wrongful aspects of private labelling that apply here.

What the private labelling allegation inadvertently achieves is betray the absolute paranoia amongst restaurants about losing customers, even on items such as samosas, Maggi and croissants. Perhaps the fear wouldn’t be as pronounced as it has been if these low-value items didn’t amount to much in restaurants’ order books. However, India’s flagging private consumption has been showing up in low average order values (AOV) for retail and online consumption of all kinds. Restaurants must be feeling the pinch, so much so that an online café delivering samosas and sundries in ~10 minutes is enough to spook the lifelights out of the NRAI.

It fits well that the NRAI’s stance on these online cafés is being articulated in the media by the Association’s recently elected President, Sagar Daryani, CEO and co-founder of the quick-service restaurant chain Wow! Momo. One look at their menu makes it apparent why food chains such as Wow! Momo must be experiencing an existential crisis with the coming of Bistro, Snacc, and Zepto Café, all delivering momos and burgers in ~10 minutes. It also betrays the absolute lack of confidence that such food chains have over commanding any sort of brand loyalty from their customers. Though it’s not that brand loyalty cannot be won on items such as momos. Several players in this space have innovated with food items that seemed difficult to reimagine. These are whole-in-the-wall kitchens or easy-to-miss dine-in outlets, which have, regardless, gained a loyal clientele through Zomato & Swiggy and are charging a premium for stuff as simple as momos. If you’re in Delhi, try out Brown Sugar!

Still, bigger players that lead associations claim that ~99% of restaurants in the delivery business don’t make money and that food outlets are shutting down. We’re told nothing further about the many reasons that may have led to a restaurant’s closure and expected to assume that it was doing everything right, had scrumptious food for the right price, but had to shut down because of Zomato’s & Swiggy’s anti-competitive practices. The restaurateurs in the Association should perhaps sample the food served in each other’s outlets. They should particularly try out Wow! Momo and think again.

What’s alleged to be anti-competitive behaviour by aggregators is, in fact, the exact opposite. It’s aggregation that fuels intense competition, on a scale once unimaginable, leading to better discovery of the many options for customers. In the process, a few options die out. This kind of a dynamic market also lets smaller players take on established brands by removing the prohibitive cost of maintaining a delivery fleet to reach the customer. For all this, Zomato & Swiggy charge a commission of 15-25% per order from restaurants, often deemed exorbitant by the latter. But charging a high price for services is more of a first-mover advantage than evidence of monopolistic behaviour.

The most crucial test to assess whether a company or two have monopolised the market is if they’ve made it harder for competitors to emerge in the space. Monopolists ensure this by lobbying the government and influencing policies favouring incumbents over new entrants. However, Zomato & Swiggy fail this test. Private alternatives such as Thrive Now and DotPe help restaurants build digital storefronts, enable doorstep deliveries through third-party logistics companies, and charge cheaper commissions. Thrive Now has also built its own digital catalogue featuring restaurants one can order from, positioning itself as a direct competitor to Zomato & Swiggy. The Open Network for Digital Commerce (ONDC) also exists as a state-backed challenge to the Zomato-Swiggy juggernaut. If the availability of these alternatives hasn’t led to a mass exodus of restaurants from Zomato & Swiggy, it must mean they truly benefit from the enhanced discoverability.

The Zomato & Swiggy success is a testament to the immense possibilities that can be unlocked by enabling competition in India, not curtailing it. This intense competition is chipping away at the brand loyalty and sales volumes of established restaurants. Lobbies in India are a bit like the boy who cried wolf. Everything innovative for the customer is anti-competitive for them. They should temper their shouts a bit, to ensure someone is listening when the ‘anti-competitive’ wolf finally appears.