Major food delivery apps Swiggy and Zomato are exploring charging a “platform fee” on every order placed.
Following first-ever reported profits
Zomato has started rolling out a “platform fee” of Rs 2 per order, which is levied irrespective of the cart value.
This move comes soon after it recently reported its first-ever quarterly profit in Q1Fy24 and seeks to maintain that path.
Zomato posted a surprise net profit of Rs 2 crore in the three months to June, attributed largely to a reversal of a tax amount.
Even without that, the company’s financial metrics – GOV, revenues, transacting user base and delivery costs, among others – had also improved in the quarter.
Experimental phase
The additional charges have only been rolled out to select users and have not been introduced on Blinkit, Zomato’s quick-commerce platform.
The app said it is a “small fee that helps us pay the bills so that we can keep Zomato running”.
A spokesperson said this is an experiment for now. “This is in an experiment phase right now, and we may or may not scale.”
Large cumulative sum
Although the fee is quite small, representing only 0.5 percent of Zomato’s average order value (AOV) of around Rs 415, it would still amount to a large corpus.
Zomato delivered around 17.6 crore orders in the June quarter, which translates to roughly 20 lakh orders a day.
An internet sector analyst said, “Most customers won’t even notice the small increase (of Rs 2) in their total bill, but because of Zomato’s large volumes, the fee will create huge value for the company.”
Burden on customers
“Zomato needs to show profitability to stakeholders and that will only happen when someone pays them extra, it has to either be the restaurants or the customers.
Restaurants have however resisted and shown no appetite for an additional fee of any sort and they will revolt if the system is changed.
So, customers now have to pay an extra fee.”
As it is, restaurants normally pay food delivery companies a commission of 22-28 percent on food orders.
Initial views
On August 3, when it was asked if there was a plan to roll out a platform fee and if they tried it in some micro markets, the company said differently.
“It’s a business call. We’re aware about that [peers charging a platform fee] and we’ll take a call if we think it’s the right thing for the business. At this point, we haven’t done that. There’s no platform fee on our platform,” Zomato’s CFO Akshant Goyal had said.
However, it might have changed its stance following Swiggy’s move.
Following competition’s move
Rival Swiggy had started levying a platform fee of Rs 2 on all food orders about four months ago.
“Also, Zomato knows Swiggy charges a platform fee and has noticed that Swiggy’s volumes were not hit. A company is either forced to make decisions on its own or will follow competition just because of positive results,” the analyst added.
