Delve into the ONDC vs Zomato-Swiggy clash and uncover its significance for the competitive landscape of the food-delivery sector. Explore the key aspects and implications of this ongoing battle between two major players in the industry.
The government-backed Open Network for Digital Commerce (ONDC) platform has taken social media by storm over the last week, with users heaping praise on the platform for better pricing of products in comparison to food-delivery majors Zomato and Swiggy. Menu items from major food chains, including McDonald’s, Taco Bell, Behrouz Biryani, Wow Momo, Pizza Hut and Cafe Coffee Day, are available at a 30-80% discount on ONDC platforms such as Paytm and Magicpin compared to Swiggy and Zomato, Zomato has about 16% stake in Magicpin).
Launched in late 2021 under the Department for Promotion of Industry and Internal Trade (DPIIT) as part of the Digital India push, ONDC works as a network of interconnected e-marketplaces through which sellers, including brands, can list and sell their products directly to customers. After a pilot in Bengaluru across 16 pin codes, the ONDC platform has gone live in multiple cities. It clocked 11,100 retail orders, its highest so far per day, on Apr 20, a year after its launch. ONDC vs Swiggy, Zomato : The platform is being pegged as a major disruptor in the food delivery space as ONDC allows restaurants to sell food directly to consumers through buyer apps. It also charges less than half of the commissions charged by Swiggy and Zomato, which range between 18% and 25%, enabling restaurants and food chains to better price their offerings. Orders are delivered through third-party providers such as Shadowfax, Dunzo and Loadshare for a fee paid by the restaurants. According to the platform’s website, ONDC is currently operational in 236 cities, including Mumbai, Pune, Bangalore, Noida, Kolkata and Chennai. It also claims to have onboarded over 29,000 sellers, who sell more than 36 lakh products on the platform. Paytm, Phonepe’s Pincode, Meesho, Magicpin and Mystore are among the buyer apps that have joined the platform. Alpino, Bitlsila, Bizom, BoAt, Delhivery, and Digiit, are some of the seller apps live on the network, among many others. As per a recent report by American consulting firm McKinsey, ONDC has the potential to increase India’s digital consumption by five times to around $340 billion by 2030.
While the impact of the challenges posed by ONDC is yet to be determined, the threat to the Swiggy-Zomato duopoly comes at a time when both companies are dealing with mounting losses. According to a recent HSBC Global Research note, Zomato commanded a 54% market share in the food-delivery space for the October-December 2022 quarter, while Swiggy held the remaining 46%. Amid a slowdown in the food-delivery business and pressures on profitability, Zomato, in February, approached several restaurant chains seeking a 2-6% increase in commissions. For the past two years, Zomato has been charging a commission of 18-25% per order for deliveries, depending on its arrangement with restaurant partners. Swiggy, on the other hand, recently announced that it has started charging a “platform fee” of Rs 2 from customers for every food delivery order in cities such as Bengaluru and Hyderabad. The platform fee is levied in addition to the delivery charge. Swiggy cofounder and CEO Sriharsha Majety, in an internal note to employees in January, said the food-delivery business’s growth had not been in line with projections. Both companies have also executed mass layoffs to rein in costs. Swiggy let go about 380 employees as part of companywide restructuring in January, while Zomato fired 3% of its total headcount in November 2022. Zomato and Swiggy are also dealing with other challenges such as multiple top-level exits and a steep fall in valuations. Zomato, too, has seen its stock plummet over 50% since its market debut almost two years ago. On Tuesday, Zomato’s shares plunged nearly 5% on the NSE as investors weighed the impact of ONDC on the prospects of the food-delivery platform. Meanwhile, industry body National Restaurants Association of India (NRAI), which represents over 500,000 restaurant brands, has also urged its single and multi-chain restaurant partners to start exploring the ONDC platform as an alternative channel but cautioned that they should consider long-term sustainability. Conclusion : In conclusion, the emergence of the government-backed ONDC platform presents a significant challenge to Zomato and Swiggy in the food-delivery space. With its focus on better pricing and enhanced consumer benefits, ONDC has garnered attention and support from users. While the full extent of the threat is yet to be determined, it is clear that the competition in the industry is intensifying. Zomato and Swiggy will need to respond strategically to maintain their market position and address the evolving demands of consumers. The battle for dominance in the food-delivery sector is poised to continue, and it will be interesting to see how these players adapt and innovate in the face of this new challenge.