Swiggy, a food delivery giant, has begun charging all users a nominal “platform fee” of Rs 2 per order. The fee has been imposed regardless of cart value, meaning you can have five items or only one order in your cart, but you will still be charged Rs 2. The fee will not increase as per your order quantity or the cart value.
The move is part of Swiggy’s effort to improve revenue and reduce costs, which have been affected by a slowdown in the food delivery business. The additional charge was initially introduced for users in Bengaluru and Hyderabad, but has not been rolled out in major cities such as Mumbai and Delhi yet. For now, the platform fee is only being levied on food orders and not on quick-commerce, or Instamart orders yet.
Swiggy’s CEO and co-founder, Sriharsha Majety, attributed the platform fee introduction to the slowdown in the delivery business, which has impacted the company’s growth rate. “The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally)â€æ. While our cash reserves allow us to be fundamentally well-positioned to weather harsh circumstances, we cannot make this a crutch and must continue identifying efficiencies to secure our long-term life,” Majety said in an email to employees.
Analysts suggest that while the platform fee may seem small, it could generate a significant corpus for Swiggy, given that the company delivers over 1.5 million orders daily. Furthermore, the fee is expected to be extended to other regions soon, which will help the company manage its costs.
Swiggy’s rival, Zomato, has also faced the impact of the industry-wide slowdown. Zomato’s CFO, Akshant Goyal, mentioned this in the company’s October-December quarter results, stating that the trend had been seen across the country, but more so in the top eight cities. However, Zomato has not yet introduced any platform fees.
The introduction of the additional fee is expected to help Swiggy lower its cash burn, which is significantly higher than that of Zomato.
Swiggy’s spokesperson has confirmed that the platform fee is a nominal flat fee charged on food orders.In terms of revenues, Swiggy was larger at around Rs 5,700 crore (approximately 763.4 million USD) compared to Zomato’s revenue of over Rs 4,100 crore (approximately 550.3 million USD).