Deep discounts and opaque use of algorithms by online platforms are a growing concern for not just restaurants, whose bitter quarrel with food aggregators received much ink recently, but also for hotels and retailers, says a new study.
The study on the ecommerce market in India by anti-trust body Competition Commission of India (CCI) covered stakeholders such as retailers, manufacturers, online marketplaces, hotels and restaurants as well as payment systems, but the most interesting insights centered on the struggle between service providers and online aggregators.
The report in particular sheds light on the conflict between restaurants and food delivery apps. The National Restaurant Association of India (NRAI) launched a ‘logout’ campaign against food apps such as Zomato and UberEats, holding them responsible for deep discounts and “predatory behaviour”.
Besides discounts, the main grouse of restaurants was that the food delivery apps’ algorithms were non-transparent, with advertisements being interspersed with organic results. Their search rankings were affected as a result, according to restaurants.
Aggregators disagreed. Search results, they contended, are based on user reviews and proximity to consumers. They also argued that organic listings are distinguishable from advertised results.
Online food platforms attracted 78 percent of respondent restaurants but contributed only around 28 percent of their revenue, according to the study.
What about hotels and OTAs?
The hospitality industry has a similar problem with online travel agencies (OTAs), which are their largest source of revenue after walk-ins and corporate sales. Hotels said they are forced to set unviable rates to compete with competition due to discounts, which affect their pricing on other modes. Hoteliers also blamed OTAs for a ‘unilateral and arbitrary’ increase in commissions and for imposing room and price parity restrictions.
Online agents contested these charges. They contended that the offer of discounts was above the listed price determined by hotels, said the CCI study.
Algorithms are the bone of contention in hospitality too. Hotels said the reasoning behind search rankings is opaque while OTAs said algorithms are based on number of customer visits, conversion rates, user ratings, and cancellation policies.
Same story with mobiles
The study found that mobile phones and accessories constitute the largest share of ecommerce, followed by lifestyle products. Online markets are a major channel for the phone industry, but act as a supplementary mode for lifestyle and electronic products.
This sector too is not without friction. Online goods sellers claim that ecommerce platforms give preferential treatment to a few sellers, through which brands channel their products, but the online marketplaces label themselves as third-party sellers. E-marketers say search results are algorithm-driven which takes a number of factors into account.
First Published: IST