E-commerce has changed how the world functions today. Its recent foray into the Food and Beverage industry has brought in massive changes in the domain. Although, it also bagged several challenges that affect small players in the industry the most. After the intervention of Aggregators, restaurants have seen a great volume of online orders bombarding their third-party applications. Little did restaurateurs know that what fuels their business, will eventually burn their own pockets and aren’t able to generate ROI for restaurants.
The large volume of online orders hides the unappealing truth of declining profits of the restaurants in the long run. Being subjected to heavy commissions that reach as high as 30% with delivery fees and service charges added-on, restaurants are losing a huge portion of their existing razor-thin profit margin.
Change in user volume and ROI on an Aggregator platform
Technology has redefined the daily activities right from making payments to ordering products online. Food delivery applications like Swiggy and Zomato indeed made a drastic change in the F&B industry and how we order food. In the initial period of aggregator platforms, users were minimal. Although, smartphones and “smart ordering” have just become run-of-the-mill as days passed. In the year 2015 when Swiggy had tied up with 300 restaurants and had 1000+ active users. Currently, the app has 50M+ downloads and receives an average of 1.5M orders daily. However, the statistics to individual restaurants shows a clear picture of how restaurants are facing losses in the long run.
It’s not an unheard fact that restaurants take initiatives to reduce the commissions and additional burden aggregators hold on them. Restaurants burn huge for increasing their order volume by offering discounts and other incentives and are not able to . Although this seems profitable in the initial stages to acquire new consumers, brands need not invest the same amount once a proper consumer base is established.
For instance, consider a restaurant “A” which is new to the market. “A” gets onboarded on an aggregator platform, pays huge for clicks, ranking, and invests in discounts to get more orders. After 3 years of accumulating a loyal consumer base, investing the same amount just to pay commissions on loyal customers brings a huge loss to the restaurant. While the consumer base remains constant after a certain point of time, the ROI goes steeply down even when the customer base escalates.
What restaurants can do
From a business growth perspective, restaurateurs need to look into better alternatives for retaining their brand control. Not to forget, consumer behavior has changed drastically over time. Customers prefer an easy and digital ordering process over dialing a restaurant to place an order. The pizza brand which dominated a huge portion of the food industry has now emerged as a beacon of hope to many new players in the Indian market.
After making a strategic decision in their digital proficiency, the brand started accepting orders on their online platform in 2011 which accounted for 18-20% of total sales in the year 2013. Later its online sales contributed 87% in the year 2020. While the app doesn’t have the latest features that most of the aggregator applications do, like accurate order status, knowing the rider details and live tracking, yet receives most of the orders on their own platform than any third-party application. This proves that once a brand generates a loyal customer base. It portrays a great value proportion, sky’s the limit for taking sales online. As an independent platform provides a commission-free ordering system, brands eventually save huge in the long run & helps to generate ROI for restaurants.
A smart way to acquire a new customer on your platform is by offering discounts. You can also do this by mapping a referral program to your existing users. Nevertheless, retaining customers on your platform is the most difficult task. They spend a hefty amount on discounts and commissions on the aggregator platform. The brands can retain customers through loyalty programs like cashback or scratchcards and reduce repetitive costs. Hence the cost of acquisition goes down as time passes.
Way to implement
Hiring a professional developer to generate an independent platform might be easy. However, brands need a serious and well-planned online execution strategy. It will help in achieving long-term goals and generate ROI for restaurants. YumzyX does that efficiently and more for you. With our cutting-edge technology integrated with omnichannel marketing, AI data analytics and delivery marketplace, we help brands retrieve their tech independence from the digital parasites.
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