Recent reports suggest that the Platform fees might soon rise to Rs 10-15 per order, a significant jump from the current Rs 6 charged by Zomato and Swiggy. This development is causing concern among restaurant owners who are already struggling with high commission rates and operational costs.
Current Scenario
Platform Fee Hike
This week, Zomato increased its platform fee from Rs 5 to Rs 6 per order, aiming to bolster its margins amidst escalating operational costs. Industry insiders believe that this hike is just the beginning, with expectations that the fee could soon reach Rs 10-15, aligning with global market trends. Swiggy is also expected to follow suit, further burdening restaurants that rely on these platforms for a significant portion of their business.
High Commission Rates
In addition to platform fees, restaurants are grappling with high commission rates charged by these food aggregators. These commissions can significantly eat into their profits, prompting many restaurant owners to request a reduction in these rates. The combination of high commissions and rising platform fees is putting immense financial pressure on these businesses.
Impact on Restaurants and Consumers
Inflated Menu Prices
To cope with the high commissions and platform fees, many restaurants inflate their online menu prices compared to their in-restaurant prices. This means that food ordered online is often more expensive than if the same meal were purchased directly from the restaurant. While this practice helps restaurants maintain their profit margins, it can lead to dissatisfaction among consumers who feel they are being overcharged.
Operational Challenges
The increasing costs associated with using platforms like Swiggy and Zomato are forcing restaurants to rethink their strategies. Some may consider reducing their presence on these platforms or finding alternative ways to reach customers. Others might need to absorb the additional costs, impacting their overall profitability and sustainability.
Looking Ahead
Industry Expectations
As both Swiggy and Zomato seek to improve their unit economics and boost revenues, further increases in platform fees seem inevitable. This move, while beneficial for the delivery giants, poses a significant challenge for restaurants. To survive and thrive in this competitive environment, restaurants will need to adapt by finding innovative ways to manage costs and enhance efficiency.
Calls for Fair Play
Restaurant owners are advocating for a fairer system where commission rates are more reasonable and platform fees are not excessively burdensome. A balanced approach that considers the interests of both food delivery platforms and restaurants is essential for the long-term sustainability of the online food delivery ecosystem.
Conclusion
The anticipated rise in platform fees by Swiggy and Zomato highlights the ongoing challenges faced by restaurants in the online food delivery market. While these fees are intended to improve the financial health of the delivery platforms, they also threaten the profitability of the restaurants that depend on them. As the industry navigates these changes, a collaborative approach that addresses the concerns of all stakeholders will be crucial for future growth and stability.
