5th August 2023, Mumbai: Food delivery platform Zomato is now treading the same path as rival Swiggy, and is rolling out a “platform fee” of Rs 2 per order. This platform fee is levied irrespective of the cart value, and comes at a time when the company hopes to remain on a profitable path after it reported its first-ever quarterly profit in Q1Fy24.
The additional charges have only been rolled out to select users for now, and has not been introduced on Blinkit, Zomato’s quick-commerce platform. In a pop-up where it levies the charge, Zomato said it is a “small fee that helps us pay the bills so that we can keep Zomato running”.
A Zomato spokesperson said this is an experiment for now. “This is in an experiment phase right now, and we may or may not scale.”
The Introduction of a platform fee comes after Swiggy, Zomato’s main competitor, was levying a platform fee of Rs 2 on all food orders.
Rs 2 only represents 0.5 percent
While a platform fee of Rs 2 may look small as it only represents 0.5 percent of Zomato’s average order value (AOV) of around Rs 415, it would still amount to a large corpus, analysts said. Zomato delivered around 17.6 crore orders in the June quarter, which translates to roughly 20 lakh orders a day, according to a note by JP Morgan.
An internet sector analyst said, “Most customers won’t even notice the small increase (of Rs 2) in their total bill, but because of Zomato’s large volumes, the fee will create huge value for the company. Zomato needs to show profitability to stakeholders and that will only happen when someone pays them extra, it has to either be the restaurants or the customers. Restaurants have however resisted and shown no appetite for an additional fee of any sort and they will revolt if the system is changed. So, customers now have to pay an extra fee.”
Restaurants typically pay food delivery companies like Zomato and Swiggy a commission of 22-28 percent on food orders. Similar to Swiggy, even Zomato is levying a platform fee for both regular users and the ones under Zomato Gold, its loyalty programme.
Zomato knows swiggy charges platform fee.
“Also, Zomato knows Swiggy charges a platform fee and has noticed that Swiggy’s volumes were not hit. A company is either forced to make decisions on its own or will follow competition just because of positive results,” the analyst added.
However, on August 3, during Zomato’s call with analysts after its results when it was asked if there was a plan to roll out a platform fee and if they tried it in some micro markets, the company had different views.
“It’s a business call. We’re aware about that [peers charging a platform fee] and we’ll take a call if we think it’s the right thing for the business. At this point, we haven’t done that. There’s no platform fee on our platform,” Zomato’s CFO Akshant Goyal had said.
Surprise net profit of Rs 2 crore
Zomato posted a surprise net profit of Rs 2 crore in the three months to June, helped largely by the reversal of a tax amount. Even without that, the company’s financial metrics – GOV, revenues, transacting user base and delivery costs, among others – had all also improved in the quarter, indicating better times for Zomato and its shareholders.
By- ASC Priya