Zomato and Swiggy Hike Platform Charges to ₹6 per Order

Food delivery companies Zomato and Swiggy have raised their platform fee for customers to ₹6 per order in key markets such as Bengaluru and Delhi. This marks a 20% increase from the previous fee of ₹5. In Bengaluru, Swiggy is also advertising a platform fee of ₹7, which is discounted to ₹6 at checkout.

Both companies introduced platform fees last year, initially setting them at ₹2 per order. These fees are crucial for delivery firms as they aim to improve their take rates, which determine their earnings on each order. With a duopoly in the market, Zomato and Swiggy have been experimenting with platform fees to enhance their overall revenues and profits.

Neither company responded to requests for comment. In January, Swiggy tested a platform fee of ₹10 for select users, significantly higher than the ₹3 charged to many others at that time. Although the ₹10 fee was not actually billed to users, it was displayed during checkout before applying a discount to bring the charge down to ₹5.

In April, Zomato increased its platform fee from ₹4 to ₹5 per order in major markets, including the National Capital Region (NCR), Bengaluru, Mumbai, Hyderabad, and Lucknow. Charging higher platform fees is one strategy these firms are using to boost profitability and generate advertising revenue. This approach is particularly important as food delivery platforms face challenges in raising commission rates charged to restaurants without provoking backlash.

The quick-commerce divisions of Zomato and Swiggy, Blinkit and Instamart, respectively, also impose similar fees known as handling charges. In Bengaluru, Blinkit charges ₹4 per order, while Swiggy Instamart has a fee of ₹5.

Is the Hike of ₹1 a Big Deal?

₹1 more per order might seem like chump change, but for high-flyers like Zomato (delivering millions of meals daily), it’s a cash cow. To put it simply, the additional ₹1 translates to an extra ₹25 lakh a day, or a whopping ₹1.25 – ₹1.5 crore daily for delivery.

Whopping Markup

A recent article on Livemint reported that a LinkedIn user, Vinayak Rajanahally, revealed a significant price difference between food delivery apps and direct restaurant purchases. Mr Rajanahally’s breakfast from Dakshin Café cost ₹823 on Swiggy and ₹785 on Zomato, while picking it up directly from the restaurant only cost ₹440. This represents a markup (the difference between the food item’s price at the restaurant and the price that you pay to get it delivered) of 68% and 60%, respectively.

Zomato’s revenue from operations reached ₹3,562 crore, showing a 73.2% increase compared to ₹2,056 crore during the same period last year. The recent platform fee hike might further boost this revenue. 

In FY 2024, Zomato Limited reported a total income of ₹12,961 crore, reflecting a 67% increase compared to ₹7,761 crore in FY 2023. Additionally, the company posted a profit of ₹351 crore during the financial year 2024, a significant turnaround from a loss of ₹971 crore in FY 2023.

On July 15, 2024, the share price of Zomato Ltd opened at ₹225.00, touching the day’s high at ₹232.00, as of 9:58 AM on the NSE.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.