Big discounts from food-ordering apps may not entirely be about what meets the eyes!

In order to attract more customers to their websites and maintain a loyal base, online food-ordering startups have to depend on heavy discounts, as per industry sources.

These heavy discounts also mean that these websites and mobile applications burn the money they have raised from investors. However, with scant funds, they are forced to ask their collaborated restaurants to offer discounts on their prices. In order to do that, several restaurants that have tie-ups with these websites scale up their prices beforehand, so that they don’t suffer losses after these crazy discounts are offered. The reason behind this is that almost 50% of their business comes from these apps, and unless they offer heavy discounts, they won’t be notably visible on these websites and mobile apps.

"Once we stop the discounts, we have seen orders falling to less than 25% on some days," the owner of a Delhi-based kitchen for Mughlai food told ET. "It has become imperative as customers have gotten hooked to them," he continued.

With more and more restaurants going this way, food-ordering startups have come in a tight spot. Because of tough competition, they can’t either afford to not offer discounts to their customers or ask the partner restaurants to lower their bills. They in turn ask them to offer discounts. The owner of a biryani specialty chain in Bengaluru told ET that food-ordering startups ask restaurants to offer up to 20% discounts on their dishes, which is not feasible because it contributes to only 10%.

"Adding a commission charge of about 12% per order and a 10% delivery charge, our cost increases to about 40% of the listed price of a dish," he further stated.

However, Foodpanda India, which is India’s largest food-ordering website having around 12,000 restaurants collaborating, denied that it forces restaurants to offer discounts, but maintained that websites and restaurants both offer discounts and it has been the strategy ever since the beginning.

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