(iStock)
(iStock)

Opinion | Discount addiction detox

Wiping out market-creation losses typically involves reducing customer subsidies bit by bit and getting service partners to taken on some or all of the burden

If you’re looking to order food home or book a table at a restaurant, you may soon find that your favourite eat-out place is missing from the app you swipe open on your phone. According to a news report, about 300 restaurant brands in Gurgaon are delisting themselves from aggregators and table-reservation services such as Zomato and EazyDiner, over deep discounting. They’ve cited adverse revenue implications as the main reason, and have come together to detox consumers from their discount addiction. And this is not just about Gurgaon; Eateries in Delhi, Pune, Mumbai, Kolkata and Bengaluru are likely follow suit.

The business strategy of many online services is to first offer price cuts to lure people, and then gradually raise prices to turn profitable once they have a large customer base habituated to the convenience on offer. The assumption is that large sums of money ploughed in to gain a bit of the world’s most prized real estate—place for an app on your mobile phone—can be more than made back at some point in the future. The success of this strategy, however, depends on whether online businesses and their partners can endure the expenses along the way.

Every such user-subsidising business must face a moment of reckoning, for sure, and answer tough questions on its so-called “path to profit". Wiping out market-creation losses typically involves reducing customer subsidies bit by bit and getting service partners to taken on some or all of the burden. It’s not easy. In the food-ordering business, some restaurants have turned restive, arguing that they would be better off on their own. How food apps respond would be interesting.

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