Swiggy Takes On Zomato With 0% Commission Strategy

Foodtech major Swiggy has announced a new initiative, Swiggy Launchpad, under which newly onboarded eateries will not have to pay any commissions for the first month.

In a statement, the foodtech major said that the scheme will help its partners save up to INR 20,000 in commissions and other benefits.

The decacorn said that the move will enable new restaurants to sign up with Swiggy and drive the growth of its platform. It will also encourage restaurants that are new to Swiggy to adopt the food delivery model and shore up the entire ecosystem. 

“Swiggy Launchpad seeks to build a win-win relationship with the restaurant partner ecosystem,” added the company. 

The startup added that the offer of 0% commission for the first month would help new partners test the waters before taking a complete plunge into the food delivery ecosystem.

“With 0% commissions for the first month of their operations, we hope more restaurants, cloud kitchens and other food entrepreneurs feel confident about online food delivery and take the plunge. We look forward to welcoming many new partners,” said the CEO of Swiggy’s food marketplace Rohit Kapoor.

Among other things, Swiggy also announced a slew of sops for new restaurant partners to help them drive growth and scale operations. The newly onboarded restaurants will also get access to a dedicated growth manager, free advertisements on the app and an extended delivery radius. 

Curiously, the move comes weeks after reports surfaced that competitor Zomato had pitched the idea of a 2-6% hike in commissions to several restaurant chains. While commissions from restaurants are the biggest source of revenue for foodtech players, it is also the biggest source of expenditure for eateries listed on such platforms. 

Swiggy claims to add nearly 10,000 new restaurants a month on its platform and has more than 2.5 Lakh restaurant partners enabled on its app.

Losses Drag Swiggy Down

The announcement comes at a time when Swiggy has been grappling with mounting losses and heavy cash burn. 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. 

A resurgent competition in the form of Zomato has not helped either. Investor Prosus’ half-yearly financial reports released in November last year pointed out that Swiggy was fast losing market share to Zomato despite offering heavy discounts.

This also comes close on the heels of Swiggy offloading its loss-making kitchen infrastructure business Swiggy Access to cloud kitchen startup Kitchens@ in a share-swap deal. Swiggy has also wound up its private label The Bowl Company in Delhi-NCR and the meat marketplace in the recent past over non-performance-related issues. 

Even as reports continue to surface that the company was prepping for a public listing, it has been battered by weak global cues and apprehensions of recession. As a result, it has been looking to cut corners and consolidate its operations. This policy saw Swiggy undertake retrenchments at the company, firing 380 employees earlier this year.

While it has undertaken new launches as well, it continues to be in the red and has been raking up heavy losses. As funding winter intensifies, it remains to be seen whether the move to forego commissions for a month would bode well for Swiggy or not.