No Commission From Restaurants & INR 2 Platform Fee From Customers, Swiggy Delivers An Interesting Playbook

Foodtech giant Swiggy has started charging a platform fee of INR 2 per order, irrespective of the cart value. The move has come at a time when the platform seems to be highly focussed on profitability.

Currently, the platform fee is only applicable to Swiggy’s food delivery service. The company has not implemented it for Instamart orders.

“The platform fee is a nominal flat fee charged on food orders. This fee helps us operate and improve our platform and enhance app features to deliver a seamless app experience,” a Swiggy spokesperson said.

Currently, Swiggy has rolled out the platform fee in Bengaluru and Hyderabad. The company has not disclosed as to when it would roll out the charges in other major cities.

The move comes at a time when Swiggy has been grappling with mounting losses. The foodtech decacorn saw its net losses more than double to INR 3,628.9 Cr in FY22 from INR 1,616.9 Cr in FY21.

The company’s total revenue grew 2.2X to INR 6,119.8 Cr in FY22 from INR 2,675.9 Cr in FY21. Revenue from operations rose 124% to INR 5,704.9 Cr from INR 2,546.9 Cr in the previous year.

At the beginning of this year, the decacorn said that it was planning to fire 380 employees as part of a restructuring exercise to cut costs.

In an email, Swiggy founder and CEO Sriharsha Majety told the company’s employees that the growth in the food delivery segment had slowed down, compared to expectations, which has resulted in Swiggy having to revisit its profitability goals.

It is to be noted that Swiggy announced a new initiative last month, Swiggy Launchpad, under which the platform waived off its first-month commission charged from newly onboarded eateries. According to the decacorn, the move was aimed at enabling new restaurants to sign up with Swiggy and drive the growth of its platform.

Earlier this month, Invesco reportedly marked down the valuation of the foodtech major by more than 25% to $8 Bn. Invesco pegged Swiggy at $8 Bn in the quarter that ended September 2022, down from $10.7 Bn in the previous quarter.

Despite offering heavy discounts to consumers as well, Swiggy was fast losing market share to competitor Zomato, research firm Jefferies said in a note in November last year. The report stated that Swiggy grew 40% in terms of market share while Zomato’s growth was 55% during the first half of FY23.

Moreover, Zomato started reclaiming market share from Swiggy since the relaunch of its loyalty programme, Zomato Gold, in January, as per an HSBC Global Research report.

As the competition heats up in the space, it remains to be seen how the latest move impacts Swiggy’s market share and bottom line.