Zomato and Swiggy, two of the largest food delivery companies in the world, shocked consumers in important cities like Bengaluru and Delhi by increasing their platform costs by 20%, to Rs 6. Both sites gradually raised their order fees from Rs 2 to Rs 6 over several months.
Delivery companies rely on platform fees to boost their take rates, which dictate how much money they make from each order. Zomato and Swiggy have been exploring the possibility of using platform fees to increase their total revenues and profits because they have formed a pair of monopolies. Compared to the Rs 3 that many users were paying at the time, Swiggy’s January platform charge of Rs 10 was significantly higher. During checkout, users were shown the higher fee of Rs 10, however, they were only charged Rs 5 after a discount. This was just to tease them.
In several important cities, such as the National Capital Region, Bengaluru, Mumbai, Hyderabad, and Lucknow, Zomato raised its platform cost from Rs 4 to Rs 5 for each order in April.
These companies are attempting to boost their business revenue in several ways. One is by charging greater platform fees; another is by increasing their ad revenue. Platforms, especially those involved in food delivery, are struggling to raise the commissions they charge restaurants without displeasing them, thus this becomes important.
Moving Away From Earlier Statement
The increase contradicts Swiggy‘s previous claims that it had no intentions to significantly raise the platform price. Analysts believe that both businesses will keep raising rates until they see customer pushback and a decline in order volumes.
At this time, the platform charge is only applicable to Swiggy’s and Zomato’s food delivery services; neither company has expanded it to cover their quick commerce businesses, Instamart and Blinkit. But in March 2023, a rival in the fast delivery industry named Zepto introduced a platform fee. With a daily order volume of approximately 5.5 lakhs, Zepto’s Rs 2 platform fee brings in an extra Rs 11 lakh in revenue. Zepto doesn’t have a meal delivery service like Zomato or Swiggy; it focuses solely on fast commerce.
Cut Back Expenses
There may be a way to cut down on operational expenses associated with delivery services by using the platform charge. Expenses like these pay for things like delivery workers, app infrastructure, and fast customer service. Without significantly diminishing the quality of their primary offerings, Zomato and Swiggy may be attempting to strike a compromise between these operational costs by raising the platform fee.
It May Lead to a Change in Market Dynamics
As customers seek out more cheap solutions, newer or smaller platforms may see an increase in subscribers, leading to more competition in the meal delivery sector. As a result of the charge increase, eateries may have to adjust their prices to absorb the added costs without driving away consumers. To attract budget-conscious consumers, they may either raise menu prices gradually or provide more deals and discounts. The overall cost and service arrangement of the food delivery industry can be affected by these changes in the long run.
Anish Sharma
