Will Zomato, Swiggy’s Platform Fee Hike to Rs 6 Boost Unit Economics?

Food delivery platforms Zomato and Swiggy have increased their platform fee by Rs 6 from Rs 5 in Delhi and Bengaluru. This is a 20 per cent increase by both platforms. Now, a food item that was costing Rs 542 earlier will cost Rs 543 under the new platform fee. Sounds meagre? Not when you look at the quantity of orders. The food delivery platform reportedly delivers 2.0–2.2 million orders per day. So, a Rs. 1 increase on it would be quite a fortune. Before delving any further, let’s understand the concept of platform fees. What is a Platform Fee?In simple words, it’s the fee charged for using a particular platform. It is separate from delivery charges, goods and services tax, handling fee, and others. Platforms such as BookMyShow or MakeMyTrip also add these fees to their ticket booking services. This year, e-commerce platform Myntra also increased the platform fees for shoppers by Rs 20 on each order. Additionally, e-commerce platform Nyka also levied a convenience fee, or platform fee, of Rs 29 last year. Read: Zomato Founder-CEO Deepinder Goyal Achieves Billionaire StatusWhy do Companies Charge Platform or Convenience Fee? Simply speaking, companies charge convenience fees to improve their unit economics (the price at which each good or service is sold and the total profitability earned out of it). Adwaita Nayar, CEO of Nykaa Fashion, reportedly stated that they see the potential to improve margins by implementing certain charges at the cart level to encourage better customer behavior. This approach is also expected to enhance profitability, she added. Analysts, as per the Economic Times, speculate that platforms might not have much space to increase the restaurant commissions they get. Thus, along with platform fee, these companies are looking at advertisements to improve their unit economics, according to the report. Read: Zomato Restarts Intercity Legends, Discontinues ‘Xtreme’ Delivery Service: Report So, has it worked for e-commerce platforms? Zomato says it has. At the start of Q2FY24, the food delivery giant imposed a platform fee of Rs 2–5 per order. During the third quarter of FY24, Zomato declared a profit for the third time in a row. The increase in profits was attributed by the corporation to the implementation of a platform fee for all users in July of the preceding year. 

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