Wednesday, January 20, 2021
Home Opinions Zomato's greed, alleged wilful misinterpretation, arbitrary decisions and Swiggy's complicity in potential data theft

Zomato’s greed, alleged wilful misinterpretation, arbitrary decisions and Swiggy’s complicity in potential data theft

The question that begs an answer is whether one person's greed should be allowed to derail the investment environment in the country?

It is now 2 weeks since the first part of this article was published. In this follow-up, we look deeper into the murky dealing of Zomato and its CEO Mr Deepinder Goyal.

Fines on Late Deliveries

Restaurant owners registered with Zomato for deliveries were sent a message, stating that, effective 20th August 2019, the following fines would be applicable on deliveries against delay in the processing of orders.

Fines imposed by Zomato

There was no other communication or intimation, nor was feedback from Restaurants sought, as is generally accepted trade practice, before implementing these drastic changes in the Zomato business model. As is their wont, the powers that be at Zomato decided to unilaterally change their business policy and conveyed the new policy without any concurrence or dialogue with the Restaurant Management.

For a Restaurant, their first priority is and will always be their walk-in customer. Any order received from an online aggregator like Zomato or Swiggy is incremental business, and hence, will be accorded lower priority as compared to a walk-in customer. Every businessman knows that incremental business from new verticals is always an add-on and not a substitute for the main business model.

The National Restaurant Association of India (NRAI), a restaurant trade association, played a vital role in quashing of this unilateral policy change by Zomato. They protested against the unilateral change at the highest levels. Though Zomato had taken unilateral action, NRAI advised its members against taking any drastic action such as logging off the delivery platform.

There was opposition to the unilateral change by the restaurant owners individually as well. Nearly every restaurant owner that we spoke to told us that they had called up their Zomato Relationship Manager to register their protests against such arbitrary and unilateral changes in policy. The Relationship Managers, who are the only bridge between the Restaurant and Zomato, were equally perplexed by the unilateral policy change, and simply told the restaurant owners to log off the Zomato delivery platform for the day as a sign of their protest.

By midday of 20th August 2019, the powers that be at Zomato realized that they had overplayed their hand and that the restaurant owners were calling their bluff, some having logged off their platform for the day. Zomato sheepishly and shamelessly retracted their unilateral policy change with the following message:

Dear Merchant(s),

We recently rolled out a policy to align the interests of users, Zomato and restaurants towards better user experience – which was not received well by some segments of the industry.

With immediate effect, we are suspending the policy communicated to you – we will collate more feedback and come back to you with next steps. Any charges that were levied today will be reversed.

Thank you for being a loyal partner to us. We look forward to continuing working with you.

-Team Zomato.

Personal attack on the President of NRAI by Zomato CEO

The #Logout campaign is being spearheaded by the National Restaurant Association of India (NRAI). As the voice of the Indian restaurant industry, NRAI represents the interests of more than 500,000 restaurants, which is a sector valued at more than USD 4 billion. The current President of NRAI, Rahul Singh, is the Founder & CEO of BTB Marketing Pvt. Ltd. which owns and operates “The Beer Café” across India.

Rahul Singh is a successful businessman in his own right, having set up a successful chain of more than 40 restaurants in India. As the President of the NRAI, it is his duty and responsibility to safeguard the interests of the members of the association. It is pertinent to note here that Rahul Singh, as President of NRAI was at the forefront of negotiating an acceptable solution to the deadlock between members of NRAI and Zomato. He was not negotiating in his personal capacity or as the owner of “The Beer Café”.

On 22nd August 2019, Mr Deepinder Goyal, the CEO of Zomato Media Pvt. Ltd., in a tweet, made an infantile attack on Rahul Singh and his business.

Mr Deepinder Goyal, has in this tweet, compared his “Zomato Gold” offering with a loyalty program “Beerocrat” currently offered by “The Beer Café”. Comparing the two products makes no sense as they are as different as chalk & cheese. “Beerocrat” is a loyalty program exclusively for patrons of the “The Beer Café” & is not acceptable at any other establishment. The discount offered is voluntary and is a means to build customer loyalty and retention. None of these attributes is offered by “Zomato Gold” to its users.

The unwarranted personal attack on the President of the largest restaurant association in the country was in extremely poor taste. Mr Rahul Singh, maintaining the decorum of the office of the President of NRAI, has not commented or reacted to Mr Deepinder Goyals juvenile rants on Twitter.

In the meanwhile, all restaurants in Jaipur & Vadodara have logged off “Zomato Gold”. The exact number of restaurants logged off pan India cannot be calculated, as Zomato has since stopped displaying the number of restaurants that honour “Zomato Gold”. A rough estimate by the NRAI puts the number of logged off restaurants at about 2,500.

The greed of 1 man may be adversely affecting the investment scenario in India.

The recent logjam over “Zomato Gold”, has cast aspersions over the foreign investment scenario in India. Alibaba Group Holding Ltd., an investor in Zomato Media Pvt. Ltd., has temporarily halted fresh investments.

The article further states “They are not seeing the kind of opportunities in India within Alibaba’s ecosystem that will really compel them to invest. So, while they also have to work to get some exits, they would rather wait it out and not invest, rather than make risky investments,” said the second person, a senior investment banker who has worked on past deals with Alibaba.

The question that begs an answer is whether one person’s greed should be allowed to derail the investment environment in the country?

POS- Data Bully

Point of Sale or POS is a utility software used by restaurant owners primarily for billing. Many POS systems are software suites that include sale, inventory, stock counting, recipe management, vendor ordering, customer loyalty, human resource, accounting and reporting modules. A well-managed F&B business will have integrated all the above in their day to day activities.

Like most ERP solutions, POS Utility Suites (POS) have now shifted storage of the backend data from physical servers to the cloud. Hence, nearly every Restaurant that has implemented POS now stores all data related to their business on the cloud, usually hosted by the Software Company that has sold and implemented the software. The Service Level Agreement (SLA), signed & executed by both the Restaurant & Software Company clearly states that all Data stored on the cloud, including all Intellectual Property like recipes, belongs to the Restaurant alone.

After our previous article was published, we were approached by the CEO of one of the leading POS Utility Suites in India, who on the condition of anonymity, shared his experience while dealing with the CEO of a leading Online Food Aggregator.

The CEO of the Food Aggregator offered to buy out his POS Utility Suite. His grand plan was to implement the POS Utility Suite across all the restaurants listed on his platform for Delivery, initially at no cost to the restaurants. The Online Food Aggregators plan was to make the implementation of the POS mandatory for all restaurants registered for delivery on his platform.

While the Restaurant would get access to a world-class POS Utility Suite, their data and intellectual property could have been compromised anytime by the Online Food Aggregator. Recipes, the most vital intellectual property for any restaurant have to be defined in these POS Utility Suites to calculate inventory, consumption and costing.

Recent events have shown that ethics and principles are not the strongest suites of the said food aggregator. The CEO of the POS Utility Suite understood the nefarious intentions of the Online Food Aggregator and promptly recused himself from any such discussions. Meanwhile, the POS Utility Suite has done well for itself on its own, having established clients across more than 100 cities across India and overseas as well.

On a related note, another POS Utility Suite, Torqus Systems, was recently bought out by Dineout, a restaurant table reservation service company, owned by Times Internet. Only “Times” can tell whether they too have any such grandiose plans!

Swiggy: The Silent Perpetrator

With all the attention being directed at the brash CEO of Zomato, Mr Deepinder Goyal; their main competitors are equally if not more; guilty of using their platform and manipulating business unfairly. Swiggy, an Online Food Aggregator, is owned by Bundl Technologies Pvt. Ltd. The Bangalore based company, operating in over 100 cities, is headed by Mr Sriharsha Majety. The management is known to operate under the radar.

As observed in the previous article, the customer belongs to the restaurant with Swiggy or Zomato acting purely as a delivery agent. The Tax Invoice, FSSAI License, Health Permits, Statutory Compliances, etc. are all the responsibilities of the Restaurant preparing the food. The customer places an order based on the Goodwill & Reputation of the Restaurant built over many years at their own cost, expertise and effort.

The Swiggy platform is notoriously famous at data masking, wherein they never disclose to the restaurant the identity; neither name nor address or number of the customer placing the order. Swiggy has collated this data over the last few years, studied and analysed the ordering pattern of the customers in every locality, and used this data to curate a menu best suited for their own brands and kitchens.

Bundle Technologies Pvt. Ltd. has launched “The Bowl Company” & “Homely” brands exclusively on Swiggy. The menu at “The Bowl Company” comprises of “Single Serve Portions” of various cuisines, suitable for consumption in offices & homes by one individual, while “Homely” is traditional Indian meals served in “Bento Boxes”, again satisfying the appetite of one individual.

Both these menus have been curated by carefully “gleaning” the ordering pattern of customers of various restaurants across locations. The “gleaned” data never belonged to Swiggy in the first place. Swiggy has created a clear conflict of interest between itself and the Restaurants by launching their own brands. As per information available, Swiggy now operates more than 600 kitchens across India.

Interestingly, while a regular restaurant has to wait 45 days after listing on Swiggy’s platform to start accruing ratings, Swiggy owned brands automatically find themselves having top tier rating on their own App from the beginning.

Readers may verify for themselves, the unbelievably high number of reviews and ratings posted for both “The Bowl Company” & “Homely” on the Swiggy App against other reputed restaurants operating since few years. The link below shows a 4.4 rating for “The Bowl Company” based on 1000+ reviews. This outlet has been operational for less than a year now.

At the same time, an extremely popular outlet in the same locality, “Henny’s Gourmet” which has been operational for more than 3 years, has a 4.8 rating based on just 25+ ratings till date.

The high number of positive reviews and ratings for Swiggys brand on their own platform in such a short time span cannot be explained by any logic. The only plausible explanation one arrives at is “Manipulation”.

Taking into consideration the above, we wonder if the institutional investors at Swiggy are aware of these blatant data breaches, which may or may not attract punitive action in India, but are surely an offence under the recently enacted European Union General Data Protection Regulation (EU GDPR); as these investors also have operations in the European Union? Are the institutional investors willing to face consequences for the criminal actions of Swiggy?

We leave with the following question to our readers:

  1. Can this manipulation and willful misrepresentation, be construed as a criminal offence?
  2. Does Swiggy operate its own brand of restaurants in “Good Faith”?
  3. Has Swiggy indulged in data theft?

(This article has been written by Ankur Pandey and Chandrabhushan Joshi)

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