Swiggy, the prominent food and grocery delivery platform, is implementing a 2% collection fee on all orders for restaurants on its platform. The move, communicated to several restaurants this month, will take effect from December 20, with the fee designed to cover payment gateway charges associated with facilitating online payments from customers.
Implementation Details and Communication to Restaurants
In an email sent to restaurant partners, Swiggy stated, “Effective from 20th December 2023, we will be charging a standardized 2% collection fee on all orders. This fee is for facilitating seamless customer payments on the Swiggy platform. Please note that this amount will be deducted from your payouts.” The platform clarified that this fee is applicable only to restaurants that currently do not have an existing collection fee.
A Standard Industry Practice
A spokesperson from Swiggy confirmed the development, emphasizing that charging restaurant partners a collection fee is a standard industry-wide practice. The spokesperson explained, “Swiggy incurs this charge, and passing it on is a standard industry-wide practice. This is not new, and only restaurants that do not currently have a collection fee are being charged this amount.”
Industry Comparison and Swiggy’s Strategic Moves
The introduction of the 2% collection fee by Swiggy comes nearly four to five years after rival Zomato implemented a payment gateway fee of about 1.8% on all orders. The move is seen as a part of industry-standard practices, with both companies incorporating such fees as a component of their operations.
Strategic Context and IPO Plans
Swiggy’s decision to introduce the collection fee aligns with its broader strategic moves, especially as it gears up for an initial public offering (IPO) between July and September next year, as reported by Reuters. Earlier this year, both Swiggy and Zomato introduced a platform fee of Rs 2-3 per order for customers, aimed at improving unit economics.
Recent Board Appointments and Financial Performance
Swiggy has been making significant organizational changes, including the recent appointment of Anand Kripalu as an independent director and chairperson of its board. The company had previously appointed other industry leaders as independent directors. This development also follows Swiggy’s achievement of turning profitable for the first time in March, marking a notable milestone since its launch in 2014.
Prosus Insights and Growth Metrics
Prosus, one of Swiggy’s major backers, revealed in its annual report that Swiggy’s food delivery business experienced a 17% growth, delivering a gross merchandise value of $1.43 billion in the first six months of the year. The growth was attributed to an increase in transacting users, driving double-digit order growth and inflation in average order value. This positive performance was reported a few months after the company achieved profitability, aligning with the trajectory of its competitor Zomato.
