The duopoly of the aggregators in the food delivery space is suddenly showing signs of being challenged. Post-pandemic, the restaurant industry had been trying to push customers into direct ordering.

More recently, social media has been abuzz with screenshots of users ordering food using the buyer-side apps such as Paytm and Phonepe’s Pincode on government-backed Open Network for Digital Commerce (ONDC) at cheaper prices than aggregators.

In recent times, with players like Zomato-backed Magicpin integrating with ONDC, thousands of restaurants have onboarded on to the new network. Some key food players such as Domino’s, McDonald’s, Biryani Blues, Wow! Momo, among others, have either already onboard or are in the process.

So why is the restaurant industry betting big on ONDC?

Dishing new options

Pranav Rungta, Head of Mumbai Chapter of National Restaurants Association of India (NRAI) and Director of Mint Hospitality, explains, “Aggregators currently control sellers, logistics and buyers in a captive ecosystem and charge whatever commissions they want. Our key battle has been against the high commissions charged by the aggregators. What ONDC does is unbundle this entire ecosystem. It decentralises the entire ecosystem with buyer-side, logistics-side and seller-side network partners.”

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Currently, aggregators such as Zomato and Swiggy charge commissions that can go up to 25 per cent, for customer acquisition, logistics and enablement of orders. But the restaurant industry has long been batting for lower commissions for making their model viable.

Sagar Daryani, CEO and Co-founder, Wow! Momo Foods said that ONDC provides a level playing field for the restaurant fraternity in their delivery business. “With 18-25 per cent commissions charged by aggregators, the current unit economics of the delivery business is not viable. On ONDC, commissions range between 2 and 5 per cent plus there is a delivery fee that the restaurant or platform pays to last mile service providers. So it ends up being cheaper than the huge commissions charged by aggregators,” he added.

One of the reasons why consumer orders are currently cheaper on ONDC is also because it is offering a discount scheme. T Koshy, CEO, ONDC, clarifies, “The discount offer ‘ONDC 50’ is for the short term and for a limited number of transactions. It is meant to give a jump start to the network.”

The full menu

However, Koshy says one needs to look at the bigger picture. “ONDC is a network with multiple seller and buyer platforms. This unbundled architecture will help take the leverage back to the endpoints (customer and sellers) from mid-points (aggregators),” says Koshy. He added, “In the long term, we believe, ONDC will make the value chain more innovation driven, cost-competitive and efficient from end-to-end.”

However, it may take some time before ONDC disrupts the dominance of aggregators. A recent report by Motilal Oswal stated, “We believe that the risks posed by ONDC (to Zomato/Swiggy duopoly), will only become significant once it scales up in multiple categories (Food, e-commerce, grocery), which would give it the scale to override the delivery scale of the existing players.”

Daryani believes that for ONDC to make a real difference, it will have to enable expansion of the digital ordering user base to a newer set of customers beyond the current 20-30 million active user base of current aggregators.

Others believe getting the customer experience right will be critical. After all, Indian consumers are so used to getting constant updates on their food orders, tracking their orders, being able to seek refunds or give feedback in a seamless manner.

Rungta believes that in the long-term even aggregators are expected to see benefits and may plug into the ONDC and come onboard as seller partners or logistics partners.

According to estimates, online food delivery in India is expected to grow at 35 per cent to about $18-b GMV (gross merchandise value) and contribute nearly 18 per cent of the total food services by FY25, led by growth in users from 20 million to 60 million.

Thrive gets going

Meanwhile, disruption is coming from another source -— emergence of food tech platforms that give restaurateurs more options. Take for instance: Hashtag Loyalty, which operates Thrive, and backed by the likes of Coca-Cola India and Jubilant FoodWorks, the operator of Domino’s restaurants in India. Thrive provides restaurants with ordering solutions by building microsites for individual restaurants, multi-outlets, and even larger F&B corporations, from which customers can place their orders directly, instead of opting for an aggregator platform.

On its recent fundraise from Coca-Cola India, Dhruv Dewan, Co-founder, Thrive and Hashtag Loyalty said, “ With this partnership, Thrive will be able to accelerate its restaurant reach and acquire consumers through various Coca-Cola India assets. It’s always been restaurant-first for us at Thrive, and having Coca-Cola India’s backing will help us further our mission of having a positive impact on the online food delivery ecosystem on the whole.”

Thrive’s consumer app is now live in Mumbai. “We are looking to grow our platform on a market-by-market basis. We’re working on a lot of experiments across Mumbai to gauge consumer responses. From a launch perspective, it’s an iterative process and is constantly evolving. In the next 30-40 days consumers across the city will witness campaigns and content that will spread awareness about Thrive app,” he added.

Thrive founders are also in talks to onboard on ONDC. “Over the last year, we have been closely evaluating how ONDC will fit into our journey. We’re currently in deep conversation with the ONDC team on how we should participate,” he added.

The space is certainly getting exciting.

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