Aggregators Impact on the Food Delivery Business
By: Nikhil Rochlani
Tags: Restaurant, Food Delivery, Discount, Hospitality, Bars

There are multiple aggregators in the delivery segment in India who entered the segment to help bridge the digital gap between customers & restaurants/delivery kitchens. They added multiple unique features in their apps for customers like:-

1) Save their Delivery address

2) Save their payment details

3) Pay Online for deliveries

4) Live Order Tracking

5) Post Placing Order Consumers can double-check the order online as well as receives confirmation of the same.

6) Variety of restaurants & delivery kitchens in one app

7) Can see a detailed bill with tax break up & details of all charges

With various offers & schemes, these aggregators helped grow the delivery business many-fold over the last few years by adding innovative solutions to promote deliveries.

Initially, they were a godsend for the hospitality industry & did wonders to support the business & helped in adding to the ease of doing business as well as easing out the entire customer experience. There is no doubt they have done well for the industry too a point.

The flipside to this is:-

1) They mask customer data thereby preventing restaurants from marketing too their own customers.

2) They charge restaurants hefty per click charges to advertise which previously used to be managed by marketing to their regular customer base.

3) Due to aggregator’s deep discounting practices, they have created a marketplace that focuses more on price than quality.

4) They have floated their own delivery kitchens thereby creating a conflict with existing brands.

Over the last couple of years, their commercials have changed & have started affecting the overall feasibility of the business for restaurants.

Initially, the aggregators used to charge commissions between 10–12 % + govt taxes to restaurants which I will explain below. Currently, their commissions are anywhere between 20–25% + govt taxes.

Restaurant Margins as per

Initial charges by aggregators:-

Standard Food Cost:- 30%

Aggregator Commission- 12% + gst= 14.16%

Packaging Cost -5 %

Total Cost %- 49.16%

Restaurant Margin — 50.84%

Please note this margin is not absolute there are various fixed costs like Rental, Staff Salaries & Electricity which the restaurateur bares within this.

Restaurant Margins as per

Current charges by Aggregators:-

Standard Food Cost:- 30%

Aggregator Commission- 25% + gst= 29.50%

Packaging Cost -5 %

Total Cost %- 64.50 %

Restaurant Margin -35.50%

Please note this margin is not absolute there are various fixed costs like Rental, Staff Salaries & Electricity which the restaurateur bares within this.

These are basic margins assuming no discounts have been given by the restaurant /delivery kitchen.

If we calculate a standard cost of 30% for Rent, Electricity & Staff Salaries it leaves us with a 5.50% margin without any discounts given as per their current commissions.

I leave my readers with a few thoughts & questions to ponder over. Are they actually supporting the restaurant industry or are they building a monopoly?

They are squeezing the bottle from both sides. Customers are paying for deliveries & restaurants are paying heavy commissions.

Questions for Customers

1) Should we order from platforms that charge lower commissions?

2) Would you order from low commission platforms to help restaurants survive?

3) Are aggregators practices fair for customers & restaurants alike?

4) Should we as responsible consumers be supporting such practices, which can virtually make an industry, which supports millions of jobs go out of work, or should we support our local restaurants?

Questions for Hospitality Professionals

1) Is Delivering food via aggregators profitable?

2) Post Discounts+ Food Costs + Aggregator Commissions + staff costs + rentals + electricity + packaging how much margin are we actually left with?

3) How do we differentiate between affordable & unaffordable charges between aggregators?

4) Is it fair that our own customers data is masked from us? (i.e customer numbers, addresses)

5) Should we migrate to the newer platforms charging only bare minimal commissions to us?

Eventually, I leave it up to the wisdom of our readers to decide what is the best course of action, supporting your local industry or helping fill the war chests of a few aggregators.