Customers usually are on the winning side when old processes are disrupted in business, because the new system that usually comes out as a result of disruption, benefits the customer, economy, environment and the company that disrupted the process. Therefore, if we need to constantly evolve then we must all welcome disruption from time to time, especially if it is through new technology, new processes or new inventions.
The recent disruption that is unfolding in front of our eyes is in the auto industry. The fast approaching emission norm deadlines, high tax and registration fees by government, technological change with world moving towards hybrid or electric vehicles and lifestyle changes, especially among Uber centric Generation Next who now don’t consider owning a car as a status symbol anymore. The auto industry is under attack from all sides, and yet many will survive because they will adapt, they might nudge the government to rollback some taxes, but they will all sit and figure out something for themselves. So by the time the auto saga ends the customer would have secured the best deal and the auto players will be more agile and technologically advanced. Win Win for all.
However, there is another disruption that is taking place among food delivery aggregators and although the customer is having a ball with 40%-50% discounts, restaurant owners have now realised that these discounts are playing havoc on their traditional customer that personally walks into their restaurant. High rentals with dwindling walk-in customers have forced many restaurant owners to log out of the Zomato agreement. This only shows that disruption cannot be at the cost of the other, especially if restaurant owners happen to be ones that create the food.
The fight is basically because Zomato offers deep discounts that are even less than the list price of the restaurant menu. The price conscious customer has figured that ordering food from a restaurant is cheaper than going personally to the restaurant. This is the reason many restaurants all over India and even in Goa are seeing less and less customers and more and more of Swiggy and Zomato executives making a beeline at the restaurant delivery counter. Initially when food aggregators approached these restaurants, they enticed them that by signing up to their services they would expand their customer base and increase revenue. Little did the restaurant owners realise that their regular customer will dump them for home delivery, price being the primary reason for the switch. If this continues the way it is, most restaurants will have to be converted into exclusive delivery kitchens.
How come these food aggregators afford to give deep discounts, very simple, they have deep pockets. Flushed with investors investing in foreign dollars running into millions, they can afford to make temporary losses to gain market share. Once their clout increases they eventually call the shots as they scale up their business into a behemoth. The restaurant owners will then have no choice but to quietly agree to the aggregators’ demands. As far as customers are concerned, please remember there is no free lunch, once they have control over the restaurants, they will take back the discount they offered and that too with interest.
Recently Goa witnessed the entry of an app based taxi aggregator Goamiles, whose primary objective was too aggregate taxi services in Goa. Even though it was backed by the government, Goamiles had a showdown with traditional taxi drivers operating in Goa. Taxi drivers seem to have apprehensions on the entry of app-based taxi service because they feel that their business will get affected in this scenario, they just don’t know how. Agreed taxis in Goa fleece the customer and are very territorial, but what is the guarantee that Goamiles after getting full control over most taxi drivers will not tweak the pricing to suit their agenda. Even Uber in New York has ‘surge pricing’ which it imposes at times of high demand. How can we guarantee the Government of Goa will not resort to high surge pricing and tinker the Goamiles app as and when they feel.
Every app-based service usually enters the marketplace with heavy discounted prices, but once they have enough market-share they quietly calibrate the price when it is payback time to their investors. By then the customer is already at the mercy of the giant it has created by falling for the initial discounted price it availed. Customer interest is always protected when there is enough competition made up of small and big players making the same type of product or rendering the same type of service albeit with different quality.
Not that it is going to happen, but today after killing each other by undercutting prices only three private players remain in the telecom space. The three gentlemen can call it truce, sit over a cup of coffee and jack up the mobile services price to a population that is already hooked on to the mobile. Therefore it becomes very important that the government backed BSNL remains in the field, at least it will keep a check on the private players.
We must all welcome disruption if something good is going to come out of it, but at the same time we need to make sure competition thrives and does not get killed with deep pocketed players, artificially deflating the price to gain market share with the primary aim to finish off the competition. Customers should always be spoilt for choice and not the other way around. App based aggregators armed with deep pocket finances can scale up at a rapid pace that it can wipe out an industry in no time. That situation is never in the best interest of the customer.
(The author is a business consultant)
