Swiggy will soon introduce a platform fee of Rs 10, a jaw-dropping increase of over 3X from the current Rs 3 levied on most customers in India. The online food and grocery delivery firm has already begun teasing this new fee on its platform for select customers, as per the screenshots viewed by Moneycontrol. This strategic decision appears to be Swiggy’s efforts to boost earnings from deliveries and trim losses in preparation for its anticipated IPO launch later this year.
It is worth noting that the Rs 10 platform fee on Swiggy’s app wasn’t actually charged to the users; instead, it was just displayed during the checkout process, and customers were eventually billed Rs 5 after a discount.
However, a Swiggy spokesperson clarified that the company has no plans for a significant increase in the platform fee in the near term.
“We’re always running small experiments to better understand the consumer’s choices. This was one such experiment,” the Swiggy spokesperson said.
Surge in Platform Fees on Swiggy, Zomato
Swiggy and Zomato have a history of experimenting with platform fees as part of their strategies to improve overall revenues and profits while understanding their customers’ changing preferences amid price adjustments.
In April 2023, Swiggy first introduced a platform fee of Rs 2 on certain food orders. After observing that this additional fee did not adversely affect order volume, Swiggy expanded the platform fee to all customers a few weeks later. Although the company has incrementally raised the amount, currently charging Rs 5, a percentage of customers still pay Rs 3 as a platform fee. Swiggy has not provided an explanation for the tiered fee structure.
Swiggy’s biggest rival, Zomato, has also joined the trend of introducing a platform fee, starting with Rs 2 in August 2023. The food delivery platform subsequently raised this fee to Rs 3 in October 2023 and further to Rs 4 per order from January 2024. Surprisingly, on New Year’s Eve, Zomato went a step further by temporarily increasing the platform fee to as high as Rs 9 per order, attributing to the heightened demand for food and grocery orders across India.
In a Nutshell
Implementing higher platform fees on each order is a key strategy adopted by online food delivery firms in India to enhance profitability, complementing other revenue streams such as advertising income. This is particularly crucial considering their daily delivery volumes range from 1.5 to 2.5 million orders.
However, the sharp increase in Swiggy’s platform fee from just Rs 3 to Rs 10 could have adverse consequences. In a price-sensitive market like India, where budget-friendly customers form a significant majority, there is a higher likelihood that they may shift to Zomato if they perceive Swiggy’s platform fee as too high. This potential migration of customers can result in a significant loss of revenue for Swiggy. However, in an effort to retain and attract new price-conscious customers, Swiggy has already launched Pockethero, a platform offering food at an affordable price.
In summary, Swiggy is trying to strike a balance between the pressing need to increase revenue and profits through a higher platform fee, while simultaneously retaining and attracting new budget-friendly customers with affordable food options.
As the food delivery firms shift their focus to profitability, how might Swiggy’s Rs 10 platform fee influence user behaviour and impact the company’s position in the competitive online food delivery market in India? Let us know in the comment section below!
