India’s top food delivery companies, Swiggy and Zomato, have hiked platform fee by Rs 6 per food order in Delhi and Bengaluru, regardless of whether the customers have enrolled in Gold or other membership plans.
Customers who buy food from these platforms will now have to pay an additional 20% as a result of the raise.
The markets received the news of platform fee hike positively, with Zomato shares jumping 4% on July 15 to a new high of Rs 232. The firm earlier used to charge Rs 2 as a platform fee per order, and later increased it to Rs 5.
As per a report by Mint, these apps can charge up to Rs 9 per order during peak hours. Swiggy experimented by charging Rs 7 as a platform fee in Bengaluru, later discounting it to Rs 6.
What is a Platform Fee?
Platform fees are separate from other charges such as goods and services tax, restaurant charges, delivery fees and other fees. Each time a customer order food on these apps, a platform fee is applied.
The fee contributes directly to the revenue and cost management efforts within the companies.
Swiggy had introduced the concept of platform fees in 2023, and it was later implemented by Zomato, starting with Rs 2 per order.
Zomato later increased the fee from Rs 2 to Rs 3 in October 2023. It raised the platform fee for users from Rs 3 to Rs 4 in January this year and later revised it to Rs 5 in April, a 25% rise, in selected cities such as Delhi, Mumbai, Hyderabad, Bengaluru and Lucknow.
The ecommerce arms of Zomato and Swiggy, Blinkit and Instamart, have not made these changes.
As reported by Moneycontrol, Zepto, their competitor in the space, became the first rapid delivery startup in March this year to introduce a platform fee.
Zepto delivers around 5.5 lakh orders daily and a platform fee of Rs 2 translates to a tidy additional income of Rs 11 lakh a day.
What Will These Companies Get?
Although the customers will have to pay more, the revision of platform fees significantly increases revenue for these companies as both deliver around 20-25 lakh orders per day.
According to reports, these food-delivery companies may earn an additional Rs 1.25-Rs 1.5 crore a day just by levying a platform fee.
The platform fee also becomes an important tool for these companies because there is a ceiling till which they can charge commissions from restaurants. Currently, the commission varies from between 25-35% depending on the restaurant, and this has been a major point of contention between them and the food delivery companies, as per a report by The Indian Express.
A recent report released in July by Bain estimates that over the next seven years, the food services market in India will grow at a rate of 10-12% annually, with an average spend per order rising to Rs 230–250 from Rs 220-240.
Food and grocery-delivery firm Swiggy reported a 45% jump in operating revenue for fiscal year ended March 2023 to Rs 8,265 crore, even as its net loss expanded 15% to Rs 4,179 crore.
Swiggy’s key rival, Zomato, reported consolidated operating revenue of Rs 7,079 crore in FY23, growing 69% year-on-year. The Gurugram-based company booked a net loss of Rs 971 crore for FY23, down from Rs 1,222 crore in FY22.
What Will Be The Impact on Customers?
Platform fees is one of the avenues in the supply chain which is directly under control of the companies, and is a major source of revenue for them.
For customers, it simply means more out of pocket expense while delivering from these apps.