Inside Zomato Gold: The discounts programme that has restaurants vexed

The Zomato Gold loyalty programme, a favourite of frequent diners, has become a pain-point for restaurants who allege that heavy discounting on restaurant food under the programme is hurting their business.

Launched in January 2018, Zomato Gold allows diners to avail an extra drink or an extra food item at the cost of one. According to the latest figures, 6,450 restaurants are signed up on Gold. Recently, Zomato went a step further and opened up Gold for online ordering as well.

In a sense, Gold is an extension of a few other loyalty programmes tried in the past. Zomato shut down Treats in November last year, and PiggyBank this year. Rival Swiggy runs a programme called Super, which offers zero-delivery to subscribers, and is also widely used.

The exact financial deal Zomato strikes with restaurants for Gold depends on case to case, but its pitch is simple: Joining Gold will bring you more foot-falls, more orders and, which means, more business.

Without doubt, Gold is a hit with consumers (who pay Rs 1,800 for an annual membership), as many pick restaurants that honour Gold over the ones that don’t. Zomato has also been aggressive in bringing on-board popular restaurant chains and pubs onto Gold as a means to jack-up its own Gold subscriber numbers. Zomato has 1.4 million Gold subscribers worldwide.

While all is well and good, Gold’s popularity also became its Achilles’ Heel.

Restaurants, represented by bodies like National Restaurant Association of India (NHAI) and Federation of Hotels and Restaurant Association of India (FHRAI), allege that Gold has been detrimental for the industry and has bestowed something akin to a monopolistic power to Zomato, which calls the shots on discounts and commissions. 

Things got heated up in August, when NHAI launched a full-blown campaign #logout, persuading restaurants to “log out of” Zomato Gold. The campaign got backing on social media and many restaurants, though the exact number is not known, did stop association with Gold.

The campaign also brought into focus loyalty programmes by other food tech players like Swiggy, Dineout, Nearbuy, and Magicpin, who subsequently met to hear restaurants’ grievances. Taking stock, Zomato also held several meetings with restaurant bodies over August and September and said it will tweak the Gold programme “to help drive better profit margins” for restaurants.

Zomato also had to pull down a recently launched programme called Infinity Dining, which allowed Gold members to order unlimited meals at restaurants for a fixed price. 

As deliberations went on, Zomato continued to make the case for Gold. In a October 1 blog post, it said restaurants saw 35 per cent rise in this average bill volume per day after joining Gold. Also, the fact that 90 per cent of Gold users try new restaurants frequently and that their frequency of dining has increased to 3.3 times a month from 2.8 times earlier, because of Gold, is a compelling business case for restaurants, Zomato had said.

The company has maintained “Gold is not for everyone. We always encourage restaurants to determine if participating in Zomato Gold makes commercial sense for them,” even has skirmishes with restaurants continue.

In a newspaper interview, Zomato chief executive officer Deepinder Goyal said on October 21, most of the restaurant partners, who went out, have returned so much so that total partners on Gold have gone up by 6 per cent (to 6,450) since August. He also said Gold customers have increased “three-fold” but did not give a number.

Restaurants vs Zomato

• August 14- National Restaurant Association of India (NHAI) launches #logout campaign, persuading restaurants to stop Gold membership 
• August 16- NHAI discusses concerns of deep discounting with Zomato and other food-tech players like Swiggy, Dineout, Nearbuy, and Magicpin. 
• Aug 18 - Zomato CEO says he will make modifications to Gold membership  such that it becomes “a win-win situation for restaurants and consumers”
• September 20- Zomato launched Gold program on online ordering, NHAI, restaurants join to oppose the move
• October 18 - NHAI and Federation of Hotels and Restaurant Association of India (FHRAI) hold press conference in Mumbai, urges to food apps to reduce discounts further. “They cannot decide or dictate commercial terms to and on behalf of the industry,” said FHRAI.
• October 21 - Zomato CEO says restaurants continue their association with Gold program, and that the campaign of dissent is “mostly being led by five restaurant brands.”