India’s state-backed Open Network for Digital Commerce (ONDC) has triggered a price war among its leading food-delivery firms. ONDC, which allows restaurants to sell food directly to consumers through buyer apps, offers customers the same dishes listed by market leaders like Swiggy and Zomato — but at much cheaper rates, The Business Standard reported today (May 8).
“What is happening is a paradigm shift; it is about empowering merchants to choose their strategies on discounts and other parameters,” T Koshy, chief executive of ONDC told The Economic Times. “It is also about empowering consumers to make their own choices,” he added.
ONDC has tied up with buyer apps such as Paytm, Magicpin Meesho, and PhonePe for wider reach. With many Indians now opting for ONDC and not Swiggy and Zomato, these apps are powering through the hyperlocal market by providing end-to-end delivery of orders and logistical support.
The timing couldn’t be worse for Zomato and Swiggy
ONDC is being touted as the Indian e-commerce space’s Unified Payments Interface (UPI), the government-backed instant real-time payment system which is now widely used to transfer funds between two bank accounts.
This lets ONDC provide a level playing field for micro, small, and medium enterprises. It offers dishes of popular food brands such as McDonald’s, Taco Bell, Pizza Hut, and Cafe Coffee Day at 30-80% discount on Swiggy and Zomato’s rates, the Economic Times reported.
It does not charge delivery fees either, unlike Swiggy and Zomato.
The rates it charges restaurants as commission are also far lower: 8-10% as opposed to private deliverers’ 18-25%, according to The Economic Times.
Following its beta testing in Bengaluru in September last year, ONDC has gone live in multiple cities in phased manner since then.
This is happening at a time when Swiggy and Zomato are reeling under pressure to generate profits. Rising competition from ONDC is likely to deliver more bad news to them in days to come.