Deal or no deal?

Who doesn’t love a good bargain? And when you bag an offer where a restaurant agrees to throw in a free dessert or drink along with your meal order, it’s a steal. But dining in city restaurants just got expensive, as you won’t be able to avail the discounts and deals anymore. In a bid to challenge the discounting practices of dine-in apps, many restaurants in Delhi and Mumbai have started a #Logout campaign, reportedly delisting themselves from platforms such as Zomato Gold, EazyDiner, Dineout’s Gourmet Passport, among others. #Logout is what restaurants are using to silently mark their protest against membership programs that allow diners to indulge in bargains such as ‘one plus one’ on drinks and food on their in-restaurant bills. Rahul Singh, the president of National Restaurant Association of India (NRAI) says, “The idea of scoring a deal makes us feel like we are beating the system, and to a greater extent, makes us feel special.  Discounting works in the retail space so well, because brands can limit supply, and therefore create a sense of urgency in the eyes of the consumer.  Unlike retail, where the end of season sale is to clear leftovers, a restaurant doesn’t serve leftovers at a discounted price.  It’s all prepared fresh and made to order.  Providing a 50 per cent discount or giving it free certainly nudges the eatery to reduce portion size or artificially mark-up price or use sub-standard ingredients. Discount and freebies create a negative consumer perception.  Whenever a service is undervalued through price distortion, it questions the genuinely of the service.”

Feeling the heat
With the increasing rentals and additional taxes, the restaurants allege that the burden of discounts is impossible to sustain. The average loss for giving away such deal and discounts is in the range of 10 to 30 per cent. “This move is totally justified and in fact, it has been long overdue. In the restaurant business, the proportion of fixed operating expenses is very high and therefore robust contribution margins are essential for survival and growth. Discounting badly hurts the margins and is, therefore, disturbing the fundamental business model,” says Anurag Katriar – Director & CEO of deGustibus Hospitality and Managing Committee Member and the head of the Mumbai Chapter who adds that deals and discounts were in place earlier too but the advent of schemes such as Zomato Gold completely changed the game. “Here is a product where Zomato collects money upfront from customers through subscriptions and from restaurants while onboarding the restaurants. And what are they selling to the customers? Very high discounts. And who is funding that?— Restaurants.  So Zomato gets the money, customers get the discount and restaurant bears the costs.

Gold was initially supposed to be an ‘elite program’ with a handful of restaurants and a small subscription base; it has now spread to more than 6000 restaurants and one million subscribers. Making masses discount addicts at the cost of the business itself is unsustainable.”

Manish Sharma, owner of Molecule Air Bar, says that the purpose of creating an eco-system wasn’t being solved by these apps as these apps were solely focussed on customer acquisition. “The customer has started to feel that getting a deal or discount is his right rather than a one-off offer. The discounting model is only benefiting these companies and has done nothing fruitful for us. Such high discounts can no more be offered and exiting the system is the only way right now,” says

Goumtesh Singh who co-owns restaurants such as Raasta and Yeti in Delhi laments that the restaurants can’t take those hits anymore and can’t sustain themselves. “It’s our right to give discounts in the manner we want to and no one can bully us into giving discounts to anyone. There’s nothing against the end customer but these aggregators have destroyed the market. These aggregators are just working on increasing their companies net worth on our shoulders.”

Catering to customers
The restaurateurs also feel that the discounts have hampered both, the restaurants and consumer behaviour. “Around 30 per cent of people are on Gold so now we increase the prices of the dishes because Zomato Gold will anyhow discount it. But the patrons who don’t have such membership suffer. Hence the organic menu that was there two years ago is missing in the restaurants,” says Brij Pandey, CEO, D51 - Bar and Kitchen who have delisted themselves from the aggregator apps. “If we started this protest two years ago, we would have been left with no business, as Zomato was the only platform for us to reach out to people. But thanks to Google business, and Instagram, we have found ways to reach out to consumers and mark visibility.”

The ‘fear of missing out’ had initially made many restaurants sign up with the aggregator partners. “We don’t give discounts to the aggregators but we offer a complimentary dessert which is a better gesture to the guest who pays us full price. Also, we run our own loyalty programs. There has to be a mechanism where these aggregators should create loyalty programs and not discounting to avoid bargain hunters and give rewards to more  regular and loyal customers.”

The move hasn’t however gone down well with the customers of the aggregators who feel that the restaurants have left them in a lurch. “I just renewed my Zomato Gold membership. What do I use that for now? Most restaurants in the city are so expensive that it is impossible to dine out on a regular basis without these discounts, ” says Vaishali Deshpande who has been a member of Zomato Gold for the last few years