Food aggregator platform Swiggy has introduced a platform fee of Rs 2 for all food delivery orders, regardless of the order size, in order to cut down on expenses. The fee has been implemented in phases and is currently applicable to users in Bengaluru and Hyderabad, with plans to extend it to other regions soon.
The fee does not apply to orders on Swiggy’s quick commerce arm, Instamart, but it will be levied on members of the Swiggy One subscription offering. Swiggy claims that the fee will help them operate and improve their platform to deliver a seamless user experience. The company’s rival, Zomato, has not introduced any such fee, but sources say that it is keeping a close watch on customer reception to Swiggy’s platform fee.
Swiggy has reportedly advanced its timeline for achieving profitability on its food delivery and quick commerce businesses, and the new platform fee is likely an avenue for the company to generate additional revenue. Swiggy’s cash burn in FY22 was reported to be Rs 3,900 crore compared to Zomato’s Rs 700 crore. As of Q4FY23, Zomato is the top player in the food delivery segment with a 56% market share, while Swiggy has a 44% market share, according to HSBC.
Analysts predict that this gap will widen further, with Zomato’s market share hitting 57% and Swiggy’s share dipping to 43% by the end of the next financial year. Swiggy delivers more than 1.5 million orders daily, and the platform fee of Rs 2 will help the company accumulate additional funds to redirect to its core business.
This move comes at a time when Swiggy is undertaking retrenchments and preparing for a public listing. In January, the company laid off 380 employees from its workforce of 6,000, citing challenging macroeconomic conditions and a slowdown in the growth of its food delivery business.
Swiggy’s CEO, Sriharsha Majety, stated in an email to employees that the company had to “revisit our overall indirect costs to hit our profitability goals” due to slower-than-expected growth in their food delivery business.