Delivery Dilemma: Swiggy and Zomato Hike Fees, Customers Hangry for Homemade Meals

The recent hike in platform fees by food delivery giants Swiggy and Zomato has led to widespread dissatisfaction among customers. The platforms initially introduced platform fees of Rs 2 per order in 2023, but have gradually increased them to  Rs 6 in key markets like Bengaluru and Delhi, marking a 20% hike from the previous fee of Rs 5. Swiggy has also hinted at a platform fee of Rs 7, although this has been reduced to Rs 6 after a discount. These adjustments aim to boost profitability amid competitive pressures in the food delivery market.

Capitalmind CEO Deepak Shenoy has been vocal about his reduced ordering from these platforms, citing the substantial increase in platform charges. Shenoy used to order food online about 12 times a week, but now barely orders once a week or once in two weeks. "Massively reduced ordering from Swiggy/Zomato, down to just once maybe on a weekend, like today and noticed their 'platform' charge is now Rs 6. Happy that I weaned myself off the daily ordering," he wrote on X. "They also take 30 percent from restaurants, btw."

Customers are increasingly opting for direct restaurant orders due to the significant platform fees. Shenoy also said that it wasn't just the convenience of ordering food online. The platform fee charged by the companies "has gone up considerably". "Many restaurants offer lower prices if you order direct, and for larger orders the difference is substantial," he said.

One user, Bikram Singh (@stonedsufi), commented: "Just realised that the prices are padded up as well.... realised that every dish was marked in their app at prices that were much higher. The dish was priced at Rs 295 on the restaurant menu and Rs 365 on Zomato...Have deleted Zomato and Swiggy both as padding was evident in both.Have taken a decision with the entire family - eating out will now mean going out and eating at a restaurant. No more calling food in. That's that."

While it's important to note that restaurants are responsible for fixing their prices on both Swiggy and Zomato, it's also true that platform charges of both food delivery services have been on the rise. Both the companies had launched platform fees at Rs 2 with every order irrespective of the cart value in 2023.

Zomato and Swiggy have raised platform fees in Bengaluru and Delhi to Rs 6, up from Rs 5-a 20% hike. Swiggy briefly hinted at Rs 7 but settled on Rs 6 after discounts. Both started at Rs 2 last year, gradually increasing. These adjustments aim to boost profitability amid competitive pressures in food delivery.

Food delivery giants Zomato and Swiggy have raised their platform fees to Rs 6 in key markets such as Bengaluru and Delhi, marking a 20% increase from the previous fee of Rs 5. Swiggy is also currently hinting at a platform fee of Rs 7 in Bengaluru, although this has been reduced to Rs 6 after a discount.

This is not the first time these companies have hiked their platform fees, initially introduced last year. Both platforms started with a fee of Rs 2 per order and have incrementally increased them over the months. Platform fees are crucial for delivery firms as they seek to improve their take rates-the amount of money they make on each order. With a duopoly in place, Zomato and Swiggy have been experimenting with higher platform fees to boost their overall revenues and profits.

In January, Swiggy showcased a platform fee of Rs 10 to select users, significantly higher than the Rs 3 it was charging many users at the time. The Rs 10 fee was teased during checkout, with users ultimately being charged Rs 5 after a discount. In April, Zomato increased its platform fee by 25% to Rs 5 per order in key markets, including the National Capital Region, Bengaluru, Mumbai, Hyderabad, and Lucknow.

Charging higher platform fees is one strategy these firms are using to increase profitability. Advertising income is another route they are exploring. This strategy is significant as platforms, particularly those in food delivery, find it challenging to increase the commissions they charge restaurants without facing backlash.

The quick commerce arms of Zomato and Swiggy, namely Blinkit and Instamart, also charge equivalent fees, termed handling charges. In Bengaluru, Blinkit charges Rs 4 per order in handling charges, while Swiggy Instamart charges Rs 5 per order.

The increased platform fees have led to a shift towards healthier home-cooked alternatives and direct restaurant orders, impacting the revenue of these food delivery giants. Restaurants may also reevaluate their reliance on these delivery services if patrons choose to order straight from them rather than pay the extra fees. To mitigate customer dissatisfaction, Swiggy and Zomato may need to consider strategies like introducing tier-based subscription models, strengthening the value proposition, and transparent communication about the rationale for the rate increases.