UPDATE: On 21 August, Zomato sent out a 10-point letter to all Zomato Gold partner restaurants, outlining how the company would restructure the Gold program to address the protesting restaurants’ issues.

Among other things, the letter—attributed to Zomato CEO Deepinder Goyal—said Zomato would limit the number of Gold ‘unlocks’ per table to two. Users, meanwhile, would be restricted to one unlock per day. Zomato said it would refund users who didn’t agree with the altered terms of the program.

To further encourage restaurants to remain part of the program, the letter incentivised Gold unlocks. Partner restaurants with over 1,000 unlocks a quarter would receive ad credits on the platform, while Zomato would create video content for restaurants that managed over 600 unlocks.

The NRAI, however, remained unmoved by Zomato’s overtures. In a statement, the organisation termed the letter’s contents “another attempt to stuff old wine in a new bottle”. The statement went on to say that protesting restaurants remained “united in the cause to obliviate the deep discounting phenomenon, and will therefore #stayloggedout”.

*****

Four days. That’s all it took for one of India’s most feted startup founders to admit that one of his company’s most successful programs was flawed. A program with over a million customers.

The founder is Deepinder Goyal, chief executive officer of restaurant discovery platform Zomato, which was valued at $3.6 billion in March. The program is Zomato Gold, an almost two-year-old program that offers diners a buy-one-get-one offer on food items and a buy-two-get-two on drinks.

But first, let’s rewind to the start of this saga. To 14 August 2019 and a tweet by the National Restaurant Association of India (NRAI).

“NRAI has come together to detox consumers from discount addiction,” the industry body said in a tweet. The move, the NRAI explained, was to protest the aggressive discounting and predatory pricing of aggregation companies. The industry had been discontent with Gold since its launch in November 2017. Zomato had even acceded to their demands in the past, limiting the number of Gold memberships allowed per table to keep restaurants onside. But this uneasy peace didn’t last long.

A day after the NRAI tweet, 300 restaurants in Gurugram pulled out of reservation- and membership-driven dining apps. Zomato wasn’t the only one in the doghouse. Keeping it company were restaurant reservation platforms EazyDiner and Dineout, as well as hyperlocal deal aggregators Nearbuy and magicpin. The #logout campaign included popular chains like Beer Cafe, owned by NRAI president Rahul Singh, Impresario Entertainment’s Social and Smoke House Deli, as well as Olive Group’s Sodabottleopenerwala and Olive.

Normally a company astute at reading tea leaves of conflict and opportunity, Zomato was caught under-prepared. In a flat-footed response, it claimed the campaign was instigated by a few players and was supported by less than 1% of its 6,500 restaurant partners.

AUTHOR

Abinaya Vijayaraghavan

Abinaya is a Bengaluru-based writer, covering the sprawling and exciting world of Indian e-commerce. When she is not trying to understand alpha sellers and complex supply chains, she enjoys travelling and playing badminton. Abinaya was previously a reporter at Reuters.

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