This month the business media highlighted two decisions of two different local trade associations in India – one in Kochi and the other in Ahmedabad.

Kochi: Kerala Hotels and Restaurants Association (KHRA) has boycotted orders from Uber Eats, Zomato and Swiggy in the Ernakulam District from December 1.
(The Indian Express, December 4, 2018)

Ahmedabad: Hoteliers boycott MakeMyTrip and Goibibo on heavy commission, discounts.(Times of India, December 5, 2018)

Common Denominator – Total Loss of Margins

Why did two different trade associations at two extreme ends of India take this decision?Hoteliers say, “There was a time when Online Booking Portals used to charge only 15 to 18 percent as commission. Now these portals are charging 40 to 45 percent.” So, it is this Loss of Margins for each sale that is impacting their daily operations. This will finally hit them in their Balance Sheets as well at the end of the year, as losses or diminishing profits. For Hoteliers, it has already become a reality. But for Restaurants and Food Retail Businesses, it is only a fear now because they are only in the first phase of the cycle. Without footfalls, the loss of cross-selling and up-selling dynamics on the shop floor will lead to further loss of revenue and margins

Influencing Consumer Behavioural Change

These Food Delivery Apps and Online Travel Portals are slowly changing the consumer behaviour pattern by offering unthinkable discounts to customers. Many customers now prefer to sit at home and dine because they can have two dishes they like from two different restaurants on their dining table at home with zero hassles. The food arrives earlier than the time you take to dress up and start your car. The Apps and Portals know very well that once the Consumer Behaviour changes, no associations will be able to rein it in. After all ‘customer is King’, he rules your business. He decides your success and failure as a business.

Brand Stripping

A Brand is a halo that you create around your product. These Apps and Portals are stripping your brand feeling and placing it as a replaceable me-too product before your customers. They will not allow you to show your Brand Logo or Identity on their App or Portal. Food Apps don’t even allow you to use your own unique product imagery. They will show a similar styled top-angle shot of your products spread on a table, so that there is no uniqueness. In a way, they strip your brand down to a product that competes on price in customers’ minds. The time, effort and money you spend to create a unique brand feeling are wasted because it is now standing naked.

What can these Local Businesses do now to fight these Apps and Portals?

Unfortunately, it has almost reached a stage where nobody can help now. If you ban the Apps and Portals now, half the local businesses will die because they get the majority of their customers through these Apps and Portals. They are that dependent on them. Lack of revenue will kill these businesses immediately. That is why only 270 hotels out of 550 hotels in Ahmedabad have participated in the boycott. The Times of India report mentions these figures. That is why the Kochi boycott is only for 10 days and many restaurants say that they are not in the boycott.

What should these Local Businesses do now?

These Local Businesses have only one way to go now. They have to convince their customers to come directly to their shop or resort some way or the other. They have to increase Brand Loyalty and have methods to increase footfalls at the same time. The trade associations must understand that they will not be able to fight these American global giants on their own turf. We do not have the profoundness in the knowledge of these technology companies driven by artificial intelligence. So, instead of developing Apps and Portals, they must look closely into their own customer’s mindsets and understand their customers keenly. If your customer is on your side, no power on earth can defeat you. So, go out and do everything to win their hearts and homes. Restrict the Apps and Portal business to 10% of your total revenue so that they are never in a commanding position. Think hard and deep to create your own destiny as you were always doing traditionally. Following others was never a leadership quality. Leaders always plough a new path. Do it.

What can the Governments do?

All Governments, be it centre, state or local must create policies to help Local Businesses before anybody enters to influence the neighbourhood markets like the way the Chinese do. Google and Amazon have totally different alternatives like Baidu and Alibaba in China. If any country has an open trade policy, it is fine but the country needs to shield its local businesses with the same zeal that every country needs to protects its physical borders. Today, I do not think any Government can help these Ahmedabad and Kochi trade associations by banning these Food Delivery Apps and Online Travel Portals because a majority of Local Businesses are totally dependent on them.

Restructure Architecture

The retail space design must be reworked keeping in mind the loitering habits of the delivery boys on the shop floor. If not looked into, it will bring down the customer experience, eventually resulting in a steady decline in footfalls.

Impact on Media

The impact of the disruption has already touched media. There is almost zero advertising revenue for media from these two industries – Hospitality and Food Retail. Soon this disruption will spread to all industries in the Local Business domain. Even the powerful vernacular media and local retail will not be spared. The neighbourhood market transition will be fast and furious. Beware, the traditional power brands in the local domain will be replaced if they do not have the profound knowledge to stand up to this onslaught by global giants and technology changes Empower local businesses. Create a prosperous India.