The Vendor Trap: Online Food Platforms Hurting Local Businesses

THE VENDOR TRAP: How Online Food Platforms Are Hurting Local Businesses and What We Can Do About It

Prologue: The Heart of Every Celebration – A Story of Trust and Emotion

Every celebration has a heart, and at its core lies the special product that makes the occasion complete. For many decades, India’s festivals and happy moments depended on our local bakeries and food businesses. People trusted them; names were remembered; relationships were personal. If you needed a last-minute cake, your neighbourhood cake shop in Bhopal or any city was always there to help.

Then, the age of apps arrived. Convenience started to replace connection. Digital screens took over real conversations. And a quiet revolution began – not always for the benefit of customers, but often at the expense of local businesses. It's a bitter truth that the person who bakes the cake earns the least from it, while the person who never touches the cake earns the most.

Chapter 1: The Golden Promise – A Sweet Deal That Turned Sour

Up until 2016, the bakery business in cities like Bhopal was thriving. Bakers made fresh cakes, and customers bought them directly from their shops. Everything was working well. Then, big online companies like F&P, Vinni, Flowerbora and Fakingo entered the market. These companies, operating from major cities, used SEO and online ads to appear at the top of Google searches.

At that time, they would display beautiful cake photos and charge customers ₹700-₹800 for a 500gm cake. Then, they would place these orders with local bakeries for around ₹350, including home delivery. This meant these companies were making a huge profit of ₹400-₹500 on a single cake. Local bakeries were happy too, initially, because ₹350 per cake seemed good, and they handled the delivery. But this promising offer was actually a carefully laid trap.

Chapter 2: The Silent Squeeze – Losing Identity and Profit

Slowly, these online platforms started to put pressure on local bakeries. They demanded that cakes be delivered in their branded boxes, with their message cards and carry bags. The cost of these branded materials was then deducted from the local bakeries’ payments. Bakeries that objected found their orders stopped.

These companies also brought in many vendors to fulfill orders. By creating competition among these vendors, they forced the cake rates down even further, from ₹350 to ₹300, and then to as low as ₹250.

The pressure didn't stop there. Payments were often delayed for 2-3 months, and arbitrary deductions were made during payout. Local bakeries, who had already expanded their teams and were now dependent on these orders, had no choice but to accept these harsh terms. Adding to this exploitation, some platforms (like Flowerbora) developed another tactic: once a vendor's monthly billing became substantial, they would forcefully send large amounts of their own branded merchandise – like cake boxes, candles, knives, greeting cards, banners, balloons, and even teddy bears – at inflated prices, without the vendor's permission. Often, promises were made that these items would be bought back, but in reality, they remained as dead stock with the local bakery, representing a significant financial loss and a clear example of inventory dumping.

Chapter 3: The Franchise Illusion – A Path to Financial Ruin

After some time, these companies pushed local bakeries to take up their franchises if they wanted to continue receiving orders. Franchise fees for companies could be as high as ₹15-₹20 lakh. Many local bakeries, desperate to survive, mortgaged their homes or took bank loans to buy these franchises.

But the trap continued. Soon, orders to these franchises became scarce. These platforms would sell franchises to multiple people in the same city. The franchise agreements were often only for 3 years, after which another ₹15-₹20 lakh was demanded for renewal. And most shockingly, if a franchise performed well and created demand in a city, the platform would open its own local kitchen there, effectively replacing the very partners who helped them grow. Any bakery or florist caught in this trap ended up in deep debt, losing their life’s savings.

Chapter 4: The Delivery Aggregator Model – The New Face of Extraction

Around 2019-20, delivery aggregators like Jomato and Cwiggy entered the scene. Initially, they tied up with local bakeries and restaurants, promising low commissions (5% or 10%) and weekly payouts. They offered huge discounts (60-70%) to customers, making their apps popular.

However, after a few years, their commission jumped to 30-40%. They then pressured local businesses to pay for ads on their platforms to get orders. Bakeries were also forced to offer discounts from their own margins. For a ₹500 half-kg cake, customers might see a ₹20 delivery charge, but in reality, the platform takes over 50% in commission and ad fees. Local bakeries are often left with a mere ₹200-₹250. Sometimes, when orders are low, payouts can be as little as ₹20 per cake, leading to significant losses for the baker. This is not true technological empowerment; it's a sophisticated system of profit extraction.

Moreover, this exploitation extends to their own delivery partners. Initially, delivery boys were paid around ₹10 per km, along with extra pay for picking up orders from distant restaurants or bakeries. However, these platforms drastically cut this pay to just ₹5 per km and eliminated pickup charges. For instance, a rider might travel 3 km for pickup and deliver 4 km, earning only ₹20 for the entire trip. When delivery partners attempted strikes to demand fair wages, these platforms responded by terminating key organizers and making it clear that unhappy riders could simply leave. With India's vast population and limited job opportunities, many are forced into these low-paying delivery jobs, and companies like Jomato shamelessly exploit this vulnerability. The government's silence on this issue is deeply concerning.

And their exploitation doesn't stop at businesses and riders; customers are also significantly impacted. These platforms offer a mere 1-minute window to cancel an order. After this brief period, if a customer cancels, they receive no refund. The platform often retains the majority of the amount, giving a small percentage (30-40%) to the bakery or restaurant. This means the customer loses both the product and their money. Imagine a scenario where a customer orders a cake for a relative, only to find out the relative is out of town or in a different city. Or perhaps an accidental order is placed for the wrong city. In such cases, these platforms will neither deliver the cake nor refund the customer, effectively pocketing the entire amount while giving a fraction to the vendor. This clearly shows that to maximize profits, these platforms are willing to engage in ethically questionable practices, all while the government remains a silent spectator.

Chapter 5: The Unseen Costs to Society – A Critical Appeal to Policy Makers

This issue is far more than just a few businesses losing money. It has deep and long-lasting consequences for our society, economy, and future.

The GST Paradox – When Celebration Becomes a Luxury In recent years, the government classified cakes under the “luxury goods” category, imposing 18% GST on them. The justification was simple: “Cakes are purchased by the affluent, not the common man.”

But this statement reveals a disturbing narrative — Are celebrations now the privilege of the rich? Walk into any Indian bakery, and you’ll see reality.

A birthday cake isn’t a luxury item; it’s a symbol of love, hope, and togetherness. Children from middle-class and even lower-income families save money for weeks to buy a simple ₹100–₹150 cake. Are these families rich?

Of course not. By treating cakes as luxury products, the system indirectly conveys a harsh message: “Happiness is taxable. Celebrations belong only to those who can afford them.” This policy ignores the fact that cakes are not produced in five-star hotels alone.

They are crafted:

In small neighbourhood bakeries
By self-employed home bakers
By artisans who often earn less than minimum wage
By youth who see baking as a path to dignity, not wealth (To understand the inspiring yet often challenging journey of such individuals, read about the Cake Artist's Journey: Stress to Creativity.)

Taxing cakes at the same rate as luxury goods is not fair economics — it is social segregation disguised as taxation. If a government truly believes that only the wealthy celebrate, then it fails to understand the emotional economy of India, where:

a ₹120 pineapple cake lights up a child’s birthday,
a ₹200 black forest cake becomes a farewell memory,
a ₹300 vanilla cake carries the joy of an entire family.

Celebration is not a luxury. It is culture. It is emotion. It is Indian.

And no nation should tax joy as if it were a crime. If happiness becomes expensive, society becomes silent.

When local bakeries, kirana shops, and restaurants close down, millions of families dependent on them lose their livelihoods. Our government, which already struggles to create new jobs, is unknowingly allowing existing jobs to be destroyed. If a few large corporations control all businesses, market competition will vanish, and product quality will decline. Platforms are already forcing local bakeries to use cheaper ingredients, directly compromising customer health and safety.

The most concerning aspect is the potential for increased social unrest and crime rates when large numbers of people lose their income and livelihood. It is crucial for policymakers to understand that this is not just a "business" problem; it's a question of "social stability." If we ignore these seemingly small issues today, their consequences could affect every segment of our society tomorrow, including those in power and their families.

Chapter 6: The Solution – Empowering Local Businesses to Fight Back

Despite these challenges, local businesses have the power to change their destiny. Instead of giving up, we need to understand the weaknesses of these online giants and leverage our own strengths.

Understanding the Enemy:

Online Cake Portals: Their weakness lies in product cost, quality, and the inability to deliver cakes with the same freshness as a local bakery. They rely heavily on Google Ads and SEO, making profits from high commissions and franchise fees.
Delivery Aggregators: Their biggest weakness is a limited range of designs, lack of fresh and high-quality cakes, and frequent delivery damages that spoil customer celebrations.

Our Strengths as Local Bakeries:

Premium Quality & Freshness: We can offer the best, freshest cakes.
Custom Designs: We can create any design, offering a personal touch. (To learn more about how colors can transform your cake designs, check out our blog: The Power of Colours in Cake Design)
Local Presence & Personal Touch: We build relationships, something platforms cannot replicate.

The Path Forward – Your Direct Pricing Revolution:

Here’s a practical solution, inspired by businesses like Blue Heaven:

Build Your Own Online Presence: Create your own professional website. Display a wide variety of cakes, including those popular designs found on online platforms.
Offer Fair Pricing: Sell these cakes at their actual cost, adding only a reasonable margin. For example, if a platform sells a cake for ₹550-₹600, offer the same high-quality cake for ₹350-₹400.
Provide Exceptional Service: Offer free home delivery and ensure 100% safe and timely delivery. This builds immense trust.
Optimize Delivery Costs: Consider investing in electric bikes or scooters for deliveries. This significantly reduces fuel expenses, allowing for very low-cost and efficient order fulfillment, which directly boosts your profits.
Master Local SEO:

List your business on Google My Business (GMB).
Regularly post high-quality photos of your cakes on GMB.
Share offers and updates on GMB.
Run targeted area-wise or city-wise Google Ads for keywords like online cake delivery in Bhopal or cake shop in Bhopal.

Strategic Digital Counter-Attack:

o Unite and Conquer Online: Imagine if thousands of local bakeries, every morning, collectively searched for competitive keywords like online cake delivery in Bhopal (your city), cake delivery in Bhopal (your city), or cake shop in Bhopal (your city).

o Click on Their Ads: When you see ads from these large online companies, simply click on them. Make this a part of your daily routine.

o The Impact: Each click costs these companies money. If millions of clicks come from competitors, their advertising budget will drain significantly, weakening their online presence and market reach. This collective digital action can inflict a huge financial blow, directly impacting their dominance.

By taking these steps, local bakeries can not only survive but thrive. We can regain control of our businesses, offer better value and service to our customers, and ultimately challenge the dominance of these large companies. Middlemen are optional; trust is not.

Epilogue: The Future We Deserve – A Call for Responsible Growth

India does not lack talent. It lacks systems that truly respect creators. If we want real progress:

Technology should empower, not extract.
Local businesses should earn, not merely survive.
Customers should know the truth, not merely assume.

There is nothing wrong with ordering online. The problem begins when the system hides the truth and exploits small businesses for one-sided gains. The world deserves convenience. Local businesses deserve dignity. And every Indian deserves to know: A cake is not just a dessert — It is someone’s livelihood, someone’s art, someone’s story. No platform has the right to take more from it than the person who creates it.

This is not a complaint. This is a mirror. And now, the reflection is visible.