A state with deep internet penetration, higher spending power among consumers and a general affinity of the public to new technologies, Kerala promised to be a healthy breeding ground for online food delivery apps. In the past couple of years, the state’s chief urban centres of Kochi and Thiruvananthapuram have attracted a slew of major companies, including Zomato, Uber Eats and Swiggy with over 200 restaurants doing brisk business with them. But now, it seems that fairy tale could be headed for an unfortunate end with the apex body of restaurants’ association in Kerala threatening to end partnerships with these companies.
From December 1, people in urban areas of Kochi and Thiruvananthapuram will find a hard time ordering food on the internet with the Kerala Hotel and Restaurants Association (KHRA) deciding to cross swords with food delivery apps. The restaurants’ body, which counts 40,000 hotels among its members, has a list of grievances it wants to be addressed before it can do business with these members.
Azeez Moosa, Ernakulam district president of KHRA, said lofty commission rates charged by the apps is the biggest obstacle.
“The commission rates in Kerala are higher compared to cities like Bengaluru and Mumbai. For example, Uber Eats charges almost 30% commission per order whereas others like Swiggy charges between 20-25%. The problem is there’s no uniformity. They charge less for some restaurants, more for others. So there’s a sense of partiality,” said Moosa.
Declaring special offers, of up to 50% discount on certain food items often without the consent of restaurants is another point of dispute.
“Such discounts may help the consumers a lot, there’s no doubt. But it’s eating into our profits. As it is, conventional restaurant owners make only about 15% profit these days due to rising costs. These companies are trying to lure customers with initial discounts to create a base after which they will increase commission rates even more,” he added.
Nasser, who owns Thaal restaurant in the Edapally neighbourhood of Kochi, equated the food delivery apps to ‘cancer which is spreading bit by bit.’
“We know that we cannot fight with these MNCs. But we want to put a leash on them. My restaurant gets a lot of online food delivery business, but the commission rates are too much. It has to be profitable for us too,” he said.
“It looks like they want to demolish the entire hotel industry. In Bengaluru, they have set up virtual kitchens. It’s been going on for some time. We are seeing everything,” he added.
Suhail, who runs the popular Ummees restaurant in Kochi, agreed with the same. “We are ready to cooperate with them, but they must reduce the commission rates.”
This is not the first time that lobbying groups have come out against internet-based firms in Kerala. Coincidentally, this week, the online taxi drivers association across the state are observing a strike against app-based taxi hailing firms like Uber and Ola, protesting high commissions and lack of incentives. Across cities in the state, violent confrontations have also been witnessed between those driving online cabs and those with traditional taxis. Except, Kochi, Thiruvananthapuram and parts of Thrissur and Kozhikode, online taxis are virtually absent in other cities, mainly due to push-back from traditional taxi unions. With these unions holding powerful political strength, administrations have largely shied from interfering to resolve such disputes. In many ways, such fierce antagonism on the part of the unions has lent Kerala the unpopular tag of not being business-friendly.
In a state with one of the highest rates of unemployment in the country, such conflicts do little to encourage investment opportunities and job creation. For example, in the online food delivery space, hundreds of youngsters, mostly college dropouts or those fresh out of college, are employed with firms like Zomato, Swiggy and Uber Eats and earn enough to afford their living costs without having to depend on their families. The process of registration hardly takes a day and all that these boys need is a smartphone, a motorbike and a will to traverse traffic to distribute hot, piping food.
Fahad Ashraf, a 21-year-old B.Com graduate who works as a delivery boy with Zomato, is deeply skeptical of how the KHRA order will affect his earnings.
“I have been doing this for two weeks now. I got in through a friend’s reference. I have 7 or 8 friends who are doing this. I don’t know what will happen after December 1,” said Fahad, who earns between Rs 800-900 a day working for about ten hours.
Moosa knows his organisation’s whip to suspend online food delivery services will directly result in job losses for hundreds of youngsters like Ashraf, but that’s a risk he’s willing to take for the larger sustenance of the hotel industry in Kerala.
“We don’t want to put them out of work. That’s why the food delivery persons should engage in efforts (to help us as well),” he said.
Also, on KHRA’s cards is a plan to set up an exclusive food delivery app which will cater to restaurants in their network and help them compete against app-based giants like Zomato and Swiggy. Whether such apps will stand a chance against giants who are well entrenched in this sector is a different story.
With the food delivery industry in India estimated at around $700 million with 170 million people using these apps, there is undoubtedly huge potential in the market. Companies like Uber Eats are registering 50% monthly growth across 28 cities.
“India is the fastest growing country though we have been there only for 15 months. We have recorded over 50 per cent MoM growth and now cover 28 cities and 12,000 restaurants,” Raj Beri, head of Uber Eats in Asia Pacific region, had earlier told indianexpress.com.
KHRA representatives said while they were firm on their decision to snap ties with online food delivery firms from December 1, they were ready for talks to create a common ground.
“We will not go to them for talks. Let them approach us and we’ll talk,” said Moosa.
Zomato said in a statement, “Kerala is a very important market for us and we thank each and every partner and customer for their support. Zomato’s prime objective is to contribute to the growth of the restaurant industry in the country, which we have been doing over the last decade. We are happy to discuss the matter with the authorities at Kerala Hotels and Restaurants’ Association (KHRA) to achieve amicable solution, which would benefits all the parties in the ecosystem.”
Formal responses from Uber Eats and Swiggy are still awaited. This story will be updated as and when they arrive.