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Home Business

Swiggy and Zomato to increase platform fee upto ₹15

by Ishaan Negi
July 18, 2024 - Updated On August 1, 2024
in Business, Markets, News, Tech, Trending, World
Reading Time: 3 mins read
0
Zomato gets show cause notice over alleged GST liabilities worth ₹401.7 crore

Credits: Hindustan Times

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There has been a commotion in the meal delivery market due to recent adjustments in platform fees by Zomato and Swiggy. The platform fees of both companies were raised from ₹5 to ₹6, a 20% rise. Restaurants predict that this tax will increase even more to ₹10–15, which will have a big effect on their business operations and patrons’ experiences. The possible effects of these increases on a range of stakeholders—restaurants, patrons, and the food delivery platforms themselves—are examined in this study.

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Impact on Restaurants

Increased Operational Costs

The main worry for restaurants is the greater operating costs that come with higher platform fees. The exorbitant commission rates that meal delivery platforms charge—which may be anywhere from 20% to 30% of the order value—are already a problem for many businesses. These expenses are made worse by the added platform fee, which makes it extremely harder for eateries to keep their profit margins stable.

Pressure to Adjust Menu Prices

Due to the increased fees, restaurants may feel compelled to inflate menu prices on food delivery platforms further. This strategy, while necessary to offset costs, risks alienating price-sensitive customers who might choose to order directly from the restaurant or seek alternative dining options. The discrepancy between in-restaurant prices and delivery platform prices could widen, affecting customer loyalty and satisfaction.

Call for Lower Commissions

In light of the fee hikes, restaurants are increasingly calling for a reduction in the commissions charged by food delivery platforms. Many argue that the current commission rates are unsustainable and place undue financial strain on their businesses. A reduction in commissions could help balance the financial burden and allow restaurants to offer more competitive pricing to their customers.

Impact on Customers

Higher Cost of Delivery

The direct consequence for customers is the increased cost of food delivery. The platform fee, which is essentially an added cost for using the service, makes ordering food online more expensive. With potential future hikes raising the fee to ₹10-15, customers might reconsider the convenience of food delivery, especially for smaller orders where the fee represents a significant portion of the total cost.

Impact on Food Delivery Platforms

Improved Margins and Unit Economics

The increase in platform fees is a calculated move by Swiggy and Zomato to boost their margins and unit economics. These platforms can immediately increase their revenue by raising the fee, which will assist in offsetting rising labor, technological, and logistical costs. For these businesses, increased margins are essential, especially since they want to turn a profit in a cutthroat and expensive sector.

Balancing User Experience and Profitability

However, the challenge for Swiggy and Zomato lies in balancing profitability with user experience. Excessive fee hikes could deter customers and restaurants from using their platforms, potentially leading to a loss of market share. To mitigate this risk, delivery platforms may need to enhance their value propositions, such as offering loyalty programs, better service quality, or exclusive deals to retain their user base.

Long-term Implications

Market Dynamics and Competition

In the long run, the platform fee hikes could influence the competitive landscape of the food delivery market. Smaller or new entrants might capitalize on the dissatisfaction among restaurants and customers by offering lower fees or more favorable terms. This could spur innovation and competition, leading to a more diverse and dynamic market.

Potential Regulatory Scrutiny

As platform fees and commissions become a contentious issue, there is a possibility of increased regulatory scrutiny. Authorities might intervene to ensure fair practices and prevent monopolistic behavior. Regulatory actions could include capping fees or mandating greater transparency in pricing structures, which would impact how food delivery platforms operate.

Conclusion

There has been a notable change in the food delivery industry with the recent increase in platform fees by Swiggy and Zomato. Although it seeks to increase platform profitability, it presents significant obstacles for patrons and eateries. The future of food delivery services in India will be shaped by the constant modifications and reactions from all stakeholders, striking a balance between price, convenience, and competitive dynamics.

 

 

Tags: #food_delivery#platform_feeSwiggyzomato
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Ishaan Negi

Ishaan is a student at Sri Venkateswara College, University of Delhi, where he combines his academic pursuits with a deep passion for technology and storytelling. Ever since his school days, Ishaan has been an avid reader, a thoughtful writer, and an articulate speaker. These interests have naturally evolved into a strong inclination towards journalism, especially in the fast-paced world of tech. Known for his balanced approach, Ishaan is committed to presenting unbiased viewpoints and ensuring every story he tells is rooted in facts and multiple perspectives. Whether he’s reporting on emerging startups, corporate developments, or ethical issues in the tech space, he brings a sharp analytical lens and a curiosity-driven mindset to his work. With a strong foundation in research and communication, Ishaan strives to make complex topics accessible to readers while maintaining depth and nuance. His goal is not just to inform but also to spark thoughtful conversations around the ever-evolving tech landscape.

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