Swiggy, Zomato may hike platform fee further to Rs 10-15, say restaurants

Many restaurants ask for high commissions charged by food delivery platforms to be slashed

Several restaurants listed on Swiggy and Zomato believe that the recent platform fee hike by online food aggregators will go up further.

Earlier this week, Swiggy and Zomato increased their platform fees by 20 per cent from Rs 5 to Rs 6 to increase their margins amid rising operational costs.

Many restaurants believe it will rise up to Rs 10-15 in the near future and have asked for the high commissions charged by the food delivery platforms to be slashed.

“The platform fee is definitely going to increase further, in line with where the global markets are. In markets like the UK, companies charge up to 10 per cent in convenience fees. If food is being delivered directly to consumers, they should bear the cost of deliveries. Eventually, the market will mature to the higher fee,” said Pranav Rungta, Vice President, National Restaurant Association of India (NRAI), who also owns cloud kitchen chains Curry Me Up and Chow Me Up.

“As a restaurant body representative, we would rather say they (Swiggy/Zomato) increase the platform fee and reduce our commissions. Food delivery is a mature market now. They are anyway charging Rs 50-60 for deliveries now. If they charge another Rs 5-10 as platform fee and reduce our commissions, it would be a fair and equitable market solution,” Rungta added.  

Swiggy and Zomato charge between 22-35 per cent commissions from restaurants, who have been voicing concern over it in the last two years.

“The average commission charged by the platform is about 18-19 per cent, plus GST and payment gateway charges. For us, it works out to around 24-25 per cent. But new restaurants are signing up at 28-30 per cent and paying really high commissions. It is not feasible to do business with such high commissions,” said Rungta.

Restaurants are expecting these commissions, which have been on an upward trend over the last few years, to come down as the platform fee increases.

The immediate impact of the recent platform fee hike has elicited mixed responses. While new charges have not impacted large businesses, it is pinching small cafes and restaurants which have seen a decline in orders.

“There has been a slight increase in platform fee but it has not affected our business, since customers are bearing the cost. We have not got any negative consumer feedback either,” said Kabir Jeet Singh, founder and CEO, Burger Singh, which operates over 175 outlets in over 75 cities.

Swiggy and Zomato try not to make drastic increases that would upset customers, he said, adding that consumers are not likely to complain much about a Rs 1 increase.

"We have seen less business coming in from Zomato since the fee was raised," said Payal Verma, director at Khan Market’s Blue Door Café.

"Delivery remains an important part of our business, almost half of which now comes from online orders. Raising platform fee negatively impacts our business as we have only two major players in the aggregator space," she added. 

While Swiggy and Zomato declined to comment on queries sent to them, a source close to Swiggy said the company was planning to increase the fee further any time soon.

“Initially, I didn't even notice that the platform fee had gone up. An increase of Rs 1 does not affect my order frequency much, but if it goes up to Rs 10-15, I would order out less,” said Pranjal Bhalla, a New Delhi-based student who frequently uses Swiggy and Zomato.

In April last year, Swiggy introduced a nominal fee of Rs 2 for select users, which it later expanded to all its customers. It subsequently increased the fee to Rs 3 before charging users Rs 5, and has now increased it to Rs 6 in Delhi and Bangalore.

In January this year, Swiggy tested a potential increase in its platform fee from Rs 5 to Rs 10 among “a small set of users.”

Similarly, Zomato introduced a Rs 2 platform fee in August last year, which was increased to Rs 3. Zomato had increased its platform fee to as much as Rs 9 in certain markets due to a spike in demand during the new year.

Mapping the events

April 2023: Swiggy introduces Rs 2 platform fee in select cities

August 2023: Zomato introduces Rs 2 platform fee, before increasing it to Rs 3 in select cities

October 2023: Swiggy increases platform fee to Rs 3

Jan 2024:

> Zomato hikes platform fee to Rs 4 from Rs 3, before increasing it to Rs 9 in select cities due to increased demand during the New Year
 

> Swiggy increases fee to Rs 5
 

July 2024: Swiggy and Zomato hike fee to Rs 6