Swiggy is offering a chance for its partner restaurants to get supplies like vegetables, meat, poultry etc. on credit, according to a report from MoneyControl. The measure could go a long way in uplifting the restaurant sector, an area that has perhaps borne the brunt of the economic impact due to COVID-19.
The company offers restaurants to get their supplies from Swiggy already, but the option to pay later is something new and is currently in testing. With the new credit option, restaurants can choose the ‘Pay on Credit’ option while placing an order for supplies through Swiggy.
If the option is availed, Swiggy will deduct the amount through the money it receives from customers. Thus, restaurants will receive the money they are owed, minus the credit. Dues will be shown as a credit on the books of banks and non-banking finance companies that have agreed to take exposure to this business.
This will be an extension of Swiggy Staples, the company’s B2B delivery arm. Swiggy’s competitor Zomato also employs a similar service called Hyperpure, with an analogous credit scheme.
On the restaurant side, this solves the issue of a broken supply chain. A lot of offline suppliers have stopped providing deliveries due to the uncertainty in the hospitality business, which has made the possibility of a comeback even bleak. With the help of startups like Swiggy and Zomato, restaurant owners can not only continue getting supplies, but also operate at a lower risk of burning through their inventory.
On the company’s side, this is yet another avenue that has opened up for them. The food delivery business has taken a hit, and companies like Zomato and Swiggy were already struggling to reach profitability, spending about $15 million every month for expansion and keeping existing users on board. Margins in the business are quite low, as the platforms have to offer up lucrative offers to continue getting orders. Thus, branching out is the need of the hour, and this is just the opportunity. Swiggy has also started the delivery of alcohol in certain regions of the country to the same end.
The companies are also ready to offer upto 5% discount on orders, to entice restaurant owners to choose them for their supplies.
However, the announcement has also stirred controversy in the restaurant business. Owners were already worried that the business relies too much on these platforms. Restaurant regulatory bodies and owners worry that the decision will cause the business to get sucked into an ecosystem dominated by a few key players. To counter that, the industry body National Restaurant Association of India is trying to build its own delivery networks but its relationship with the platforms goes beyond food delivery.