The National Restaurants Association of India (NRAI), an industry body, has advised restaurants to step up their own loyalty programmes on discounts through other apps, while many large companies said they are not on Gold.
Zomato Gold, first introduced in 2017, had to be withdrawn after restaurants started the #LogOut campaign in protest against the discounts given under the programme, deeming it unsustainable for business.
ETtech tries to understand the conflict between the restaurant body and Zomato, and takes a look at the business of loyalty programmes.
What is Zomato Gold and how does it work?
In its latest avatar, Gold, which is being offered for Rs 149 for three months, will get the subscribers free delivery at restaurants that are within 10 kilometres on orders above Rs 199.
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Gold members will also get discounts on food deliveries and dining out.Additionally, the terms for Zomato’s co-branded credit card with RBL Bank have also been amended. Initially, the Zomato Edition credit card holders were given a Zomato Pro membership co-terminus with the credit card, but the Pro membership has been cut short till February 23.
Upon expiry of the Zomato Pro membership, the users will be given a three-month membership of Zomato Gold.
In its previous form, Gold, Zomato’s subscription-based loyalty programme, would offer 1+1 on food at participating restaurants and 2+2 on beverages. Once unlocked at a partner restaurant, the user could avail the offers by showing their Zomato app at the restaurant.
After several complaints from restaurants about the programme making their business unsustainable, Zomato changed some of the terms for Gold. Gold was reduced to a maximum of two unlocks on the table and a maximum of one unlock per user one day.
What are NRAI’s objections with Zomato Gold?
Zomato, in 2019 proposed to expand its Gold programme to food delivery as well. This irked the restaurant industry body NRAI which backed the #LogOut campaign where restaurants started logging out of Zomato’s Gold programme. The campaign saw restaurants delisting themselves from various different loyalty programmes including EazyDiner, Magicpin and Nearbuy.
In a string of meetings between NRAI and food delivery companies, stalemate was the only conclusion.
NRAI, which met representatives of food aggregators Swiggy and Zomato to find ways to resolve the issue, said Zomato’s stand was completely “unacceptable”.
“Zomato’s meeting began with a false note as they stated their intention to introduce Gold on the delivery vertical as well. This is an entirely unacceptable proposition,” NRAI said in a statement.
NRAI even had plans to launch a loyalty programme app of its own amid an escalating face-off between restaurants and delivery aggregators Swiggy and Zomato over alleged deep discounting, data masking and violation of platform neutrality.
What are restaurant loyalty programmes?
Loyalty programmes can be best explained as tools that restaurants and other businesses use to keep their customers coming back. This is done by rewarding customers for using the restaurant’s products and services. Many well established restaurant brands have had their own loyalty programmes running for years.
Starbucks, for example, has the Starbucks Card which can be used to pay at its stores, and also provides customers with discounts and offers.
What have restaurants said about Gold?
Restaurants are either negotiating with Zomato over the Gold programme, or have refused to join it.
“We are still negotiating with them (Zomato Gold) on certain terms. Until that’s not completed, our members will wait for the outcome,” said Kabir Suri, president of NRAI, which has over 500,000 members. Suri is also co-founder of Azure Hospitality, the company that operates Mamagoto and Foxtrot restaurant brands.
“We will not be on Zomato Gold unless the terms benefit restaurant partners; we have urged all restaurant companies to take forward their own loyalty programmes,” said Riyaaz Amlani, managing director at Impresario Handmade Restaurants, which runs Social, Smoke House Deli and Salt Water Cafe. Impressario’s brands are also scaling up their similar programmes.
“We are not using Zomato Gold. We are looking to collaborate to either launch individual brand loyalty programmes or an overall loyalty programme of our own—we have a large internal database and will drive repeat transact using this,” said Rohit Aggarwal, director at Lite Bite Foods, which operates Punjab Grill, Artful Baker and YouMee chains.
What’s the CCI probe against Zomato and Swiggy about?
NRAI sought the intervention of India’s anti-monopoly watchdog to resolve what it alleged were “anti-competitive practices” followed by Zomato and Swiggy, in July 2021.
“During the (Covid-19) pandemic, the magnitude of anti-competitive practices of Zomato and Swiggy have increased manifold and despite numerous discussions with them, these deep funded marketplace platforms are not interested in alleviating concerns of the restaurants,” NRAI said in a statement.
CCI, in April last year ordered a probe into Zomato and Swiggy over alleged unfair pricing practices as well as complaints flagged by the NRAI.
NRAI had also alleged that operating parties often induce restaurant partners to commit exclusively to the respective platform. In response, the CCI said it would also look at the issue of ‘platform neutrality’ against the food-tech companies.
“It may also be seen during investigation whether exclusivity in conjunction with minimum guarantee obligation is further accentuating the structure which may come in the way of the platform operating in a neutral manner,” CCI said.
CCI said it would also investigate NRAI’s allegations around ‘price parity’ arrangements followed by Zomato and Swiggy. The competition regulator noted that restaurant partners were not being allowed to maintain lower prices on the aggregators, which could likely impact the competition market by way of creating barriers.