Wednesday, February 19, 2025

ONDC: The Game-Changer Breaking Zomato and Swiggy’s Monopoly

The rise of the Open Network for Digital Commerce (ONDC) is gradually shifting the balance in India’s food delivery sector. For years, Zomato and Swiggy have dominated this market, reshaping how consumers access food. However, ONDC introduces a new model that could transform the competitive landscape by offering an alternative approach to connecting restaurants and consumers. As noted by Corp India News, ONDC aims to democratize digital commerce, creating more opportunities for local businesses and fostering a more diverse marketplace.

This article will explore how ONDC is influencing the food delivery ecosystem, especially in relation to major platforms like Zomato and Swiggy, and the challenges these companies might face in adapting to the evolving landscape.

What is ONDC?

ONDC is a government-backed initiative designed to provide an open, decentralized platform for e-commerce. Unlike the traditional, platform-centric models of Zomato and Swiggy, ONDC connects buyers and sellers directly, offering smaller businesses—including independent restaurants and local food vendors—an opportunity to tap into the digital marketplace without high entry barriers.

This open model challenges the dominance of major players, allowing restaurants to operate more independently and potentially reducing their reliance on aggregators like Zomato and Swiggy.

How Food Delivery Apps Are Disrupting the Restaurant Industry

The rise of food delivery apps like Zomato and Swiggy has caused a significant disruption in the restaurant industry, transforming how consumers access food, while also changing the dynamics for restaurant owners. These platforms have become essential to many businesses, but newer entrants, like ONDC, are starting to reshape the competitive landscape. Here’s an analysis of how food delivery apps are disrupting the industry, with a comparison of Zomato, Swiggy, and ONDC.

Sagar Daryani, President of the NRAI (National Restaurant Association of India), pointed out, “These platforms are sourcing food from third-party kitchens and selling it under their own private labels. With full access to our customer data, they can easily redirect someone ordering a momo or biryani from Zomato to their own brand, Bistro, at a lower cost, simply by avoiding the high commission fees that restaurants have to pay. If we had access to this data, we could better understand customer preferences and tailor our menus to enhance customer satisfaction.”

He also criticized the rising commission charges imposed by food aggregators, adding, “For dine-ins, these platforms are essentially just connecting us to customers, yet they charge hefty commissions. Right now, it’s 3-5%, but tomorrow, it could increase to 10%, 15%, or more. It’s an ongoing cycle that keeps getting worse.”

1. Convenience & Consumer Behavior

Food delivery apps like Zomato and Swiggy have made it incredibly convenient for consumers to order food from the comfort of their homes. In just a few taps, users can access a variety of cuisines, read reviews, and make payments—all without leaving their couches. This convenience has fundamentally shifted consumer behavior, especially in urban centers where people are busier and less inclined to dine out.

  • Zomato: Initially, Zomato was known as a restaurant discovery and review platform. Over time, it evolved into a major food delivery service, capitalizing on the growing demand for online ordering. It has expanded its offerings to include restaurant reservations, food reviews, and even Zomato Pro, which offers discounts and promotions.
  • Swiggy: Swiggy quickly gained popularity with its reliable delivery network, aggressive marketing, and user-friendly app. Over the years, Swiggy has expanded into other services like Swiggy Instamart (grocery delivery), Swiggy Genie (pick-up and drop services), and even launched Swiggy Dineout for restaurant reservations.

The convenience and speed provided by both Zomato and Swiggy have increased the demand for food delivery, often at the expense of traditional dining-in experiences.

2. Impact on Restaurant Profitability

While food delivery apps have generated substantial revenue for platforms, the business model has had mixed results for many restaurants, especially smaller or independent ones.

  • Commissions: Both Zomato and Swiggy charge restaurants a commission fee that can range from 15% to 30% of the order value. This is a significant amount, especially for smaller or independent restaurants operating on thin margins.
  • Marketing and Visibility: These platforms offer restaurants increased visibility, but the trade-off is that restaurant owners are often forced to spend more on advertising to stand out in the crowded app ecosystem. Additionally, the platforms’ algorithms tend to favor larger chains and well-known brands, making it harder for smaller restaurants to get noticed.
  • Customer Ownership: With delivery platforms controlling customer data, restaurant owners may struggle to build direct relationships with their customers. Without owning the customer relationship, restaurants risk losing out on loyalty-building opportunities, repeat business, and valuable customer insights.

3. Disruption of Traditional Business Models

Food delivery apps have upended the traditional business model in the restaurant industry, causing many to rethink their operations:

  • Cloud Kitchens: One of the biggest changes is the rise of cloud kitchens (also known as “ghost kitchens”). These are delivery-only kitchens that don’t have a physical dining space. They can operate with lower overhead costs and cater to the growing demand for delivery. Both Zomato and Swiggy have invested in promoting cloud kitchens, and this model has become a profitable avenue for both new entrants and established restaurant brands.
  • Menu Optimization: Many restaurants have adapted by creating delivery-optimized menus. For instance, some restaurants offer smaller, simplified menus for delivery to ensure that the food is delivered quickly, fresh, and hot, reducing food wastage and increasing operational efficiency.

While Zomato and Swiggy dominate the food delivery space, ONDC is the one that could potentially reshape the food delivery landscape in India.

ONDC’s Role in Disrupting the Food Delivery Market

ONDC, backed by the Indian government, is an open network that connects buyers and sellers directly, bypassing intermediaries. Unlike Zomato and Swiggy’s platform-centric model, ONDC empowers restaurants to sell directly to consumers. This shift has introduced new dynamics to the food delivery market:

Lower Commission Rates

Zomato and Swiggy typically charge restaurants high commission fees (ranging from 20% to 30%), cutting into their profit margins. ONDC, with its decentralized approach, allows restaurants to list their services at significantly lower costs.

Direct Control for Restaurants

ONDC provides businesses with more autonomy over pricing, customer interactions, and data insights. Restaurants can now set their terms without platform-imposed restrictions.

Cost Savings for Consumers

By reducing middleman costs, ONDC can potentially offer more competitive pricing for consumers, disrupting the pricing strategies of traditional platforms. Zomato and Swiggy have long dominated India’s food delivery landscape, collectively controlling over 95% of the market share as of 2023. Their convenience, robust logistics, and extensive restaurant partnerships have revolutionized how millions of Indians order food. These platforms process an estimated 1.5 million orders daily, generating billions in revenue annually. However, this dominance has also led to growing concerns over high commission fees (ranging between 20% to 30%) and limited pricing control for restaurants, sparking debates about fair competition in the sector.

The emergence of the ONDC is now challenging this duopoly. Launched by the Indian government, ONDC is an open protocol network designed to democratize digital commerce by enabling direct connections between buyers and sellers. Early pilot projects in cities like Bengaluru and Delhi NCR have shown promising results, with participating restaurants reporting a 30-40% reduction in commission costs compared to traditional platforms. Positioned as a game-changer, ONDC is reshaping the food delivery landscape, fostering a more equitable system that empowers small and medium-sized businesses while offering cost-effective choices for consumers. Its rapid adoption is sparking significant conversations about the future of the industry.

The Challenges Ahead for Zomato and Swiggy

While ONDC provides a fresh wave of opportunities, it also brings certain challenges for Zomato and Swiggy. The need to adapt quickly to this new environment could test their resilience.

1.Adapting to a New Ecosystem

Zomato and Swiggy have built robust ecosystems around their apps, and the shift to a decentralized, open platform like ONDC may require a complete overhaul of their strategies. This could involve integrating their systems with the ONDC platform or competing with it by offering better services. The transition might not be seamless.

2.Maintaining Market Share

With new competitors entering the space, Zomato and Swiggy will need to focus more on retaining their market share. In the past, they benefited from exclusivity deals with major restaurants, but ONDC’s open platform can now erode this advantage. The food giants will have to innovate continuously to stay ahead in the game.

3.Customer and Restaurant Retention

ONDC’s model shifts power back to the restaurants, who can now choose their platforms based on convenience and cost-efficiency. This shift in control means that Zomato and Swiggy will have to strengthen their relationships with both restaurants and consumers to avoid losing ground.

Looking Ahead: The Future of Food Delivery

The food delivery landscape is evolving, and both legacy players and newer entrants will need to adapt. Zomato and Swiggy will continue to innovate and diversify their offerings (e.g., grocery delivery, subscription models), while ONDC could prove to be a game-changer for smaller businesses.

The future of food delivery will likely see:

  • More Direct-to-Consumer (D2C) Models: Restaurants and food brands may increasingly build their own apps and delivery services to bypass third-party aggregators, especially as consumer trust in independent platforms grows.
  • Data-Driven Insights: As the market matures, platforms like Zomato, Swiggy, and ONDC will leverage AI and data analytics to provide personalized recommendations and enhance customer experience.
  • Sustainability and Ethical Practices: Consumers are becoming more conscious of sustainability. Apps that embrace eco-friendly packaging, ethical sourcing, and carbon-neutral delivery could have a competitive edge.

Conclusion: A Changing Landscape for Food Delivery

The introduction of ONDC in the Indian food delivery industry signals a significant shift in the market. While it poses challenges for established platforms like Zomato and Swiggy, it also presents opportunities for growth and innovation. Rather than seeing ONDC as a direct competitor, it can be viewed as a catalyst for positive change within the industry.

As highlighted in Corp India News, the future of the food delivery sector will likely involve a more diverse range of players, offering consumers more choices and restaurants greater flexibility. The coming years will be crucial for all stakeholders involved, and how they navigate these changes will determine their place in the evolving landscape.

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