Zomato starts charging ₹2 as platform fee per order on trial basis
Food delivery platform Zomato is following in the footsteps of its competitor Swiggy by introducing a “platform fee” of Rs 2 per order. This new fee applies to all orders, regardless of the cart value. The move comes as Zomato aims to maintain profitability, especially after achieving its first-ever quarterly profit in Q1Fy24.
Currently, the additional platform fee has been implemented only for select users and has not been extended to Blinkit, Zomato’s quick-commerce platform. When users encounter the fee, they are presented with a pop-up message explaining that it is a “small fee that helps us pay the bills so that we can keep Zomato running.”
The introduction of this fee represents Zomato’s effort to generate additional revenue to sustain its operations and ensure profitability. Like other online food delivery platforms, Zomato faces various operational costs, including logistics, customer support, and technology infrastructure. The platform fee is aimed at offsetting some of these expenses and maintaining the company’s financial stability.
By starting with selected users, Zomato can gauge the response and assess the impact on its customer base before potentially expanding the fee to a broader user segment. While some users may express concerns about the added cost, the company’s justification is that the fee is essential to sustain its services and continue providing a smooth food delivery experience.
The competitive landscape in the food delivery industry is intense, with various players vying for market share and profitability. As Zomato strives to solidify its position and remain competitive, introducing the platform fee is one of the strategies it is employing to strike a balance between offering quality services and maintaining a sustainable business model.
However, the company will likely keep a close eye on user feedback and market dynamics to ensure that the fee implementation does not adversely impact customer satisfaction or lead to significant changes in user behavior.
Zomato’s decision to introduce a platform fee of Rs 2 per order comes after the company stated that it is currently an experimental measure. A spokesperson from Zomato told Moneycontrol that the fee implementation is in its trial phase, and there is no guarantee that it will be expanded to a wider user base.
The platform fee move by Zomato comes approximately four months after a report by Moneycontrol that revealed its main competitor, Swiggy, had already implemented a similar platform fee of Rs 2 on all food orders.
As both Zomato and Swiggy fiercely compete for market dominance in the online food delivery sector, they continuously explore various strategies to enhance revenue and achieve profitability. The introduction of the platform fee is one such measure aimed at offsetting operational costs and bolstering the financial health of these platforms.
During the experimental phase, Zomato will likely closely monitor user feedback and analyze the impact of the fee on its user base, order volumes, and overall business performance. Depending on the outcomes of this trial, the company may decide to either scale up the fee implementation or discontinue it altogether.
The platform fee strategy is part of the dynamic and competitive landscape in the food delivery industry, where companies seek to strike a balance between generating income and maintaining customer satisfaction. As the experiment progresses, it will shed light on how users respond to the additional charge and whether it becomes a permanent fixture in Zomato’s pricing structure.
Although a platform fee of Rs 2 may appear nominal, considering that it represents only 0.5 percent of Zomato’s average order value (AOV) of approximately Rs 415, its cumulative impact can be substantial. Analysts highlight that even a small fee like this can result in a significant corpus for the company.
During the June quarter, Zomato reported delivering around 17.6 crore orders, which translates to an average of approximately 20 lakh orders per day, as mentioned in a note by JP Morgan. When multiplied by the platform fee of Rs 2 per order, the additional revenue generated daily can amount to a substantial figure.
For a high-volume food delivery platform like Zomato, the platform fee could contribute significantly to its overall revenue stream. While each individual order may have a seemingly insignificant fee, the collective effect across millions of daily orders can make a notable impact on the company’s financials.
The introduction of the platform fee is part of Zomato’s efforts to explore new revenue streams and enhance its profitability. Such measures are common in the online food delivery industry, where companies seek to find a balance between maintaining a competitive pricing structure for customers and ensuring the sustainability of their business operations.
Zomato’s decision to experiment with the platform fee reflects the dynamic nature of the food delivery market, where companies continually innovate to adapt to changing customer preferences and market conditions. The success of this experiment will depend on how it resonates with users and how it affects Zomato’s overall business performance in the long run.
