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Order Count Goes Down After Swiggy & Zomato Raise Delivery Fees

Pritish raj by Pritish raj
January 27, 2020
in News, Startup
3 min read
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Zomato Swiggy Order
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  • Zomato & Swiggy have started passing on restaurant packing charges and certain taxes to consumers and cut down on losses per order which resulted in less orders.

Consumers who order meals online pay more for it. Zomato and Swiggy, the market-controlled food delivery apps, have increased delivery fees over the past six months, implemented competitive discounting, tighter order cancelation laws, and higher loyalty rewards costs.

This has hit order numbers, restaurants listed on those websites, and analysts told ET, along with reduced discounts overall. “The decrease in order volume is estimated at around 5-6 percent per month since October for Zomato and December for Swiggy, in line with the tightening of policies on these platforms,” a sector tracking analyst said asking for anonymity, citing confidentiality. “It will be clearer next month how the dynamics change post-Uber Eats contract,” he said.
Last week Zomato purchased Uber’s food aggregator company in India, Uber Eats, in an all-stock transaction for $350 million. After the contract, Uber gets a 10 percent stake in Zomato. Zomato has introduced “on time or free delivery”— meaning that if a consumer chooses to pay an additional Rs 10 on selected restaurants, free order is guaranteed if it is not delivered within the time promised.
It has also raised its Gold membership prices and started cross-selling at checkouts by suggesting side offers to increase the average order value. In some cities, too, Swiggy has increased delivery charges, tightened cancelation rules and order escalations, and raised prices for its’ Mega’ loyalty program. “Profitable and sustainable business models are beginning to take center stage, with a vast majority of investments attracting market leaders,” said Ankur Pahwa, Partner, Ernst & Young.

For example, depending on the distance, order value and restaurant, Zomato has introduced a staggered delivery charge for the customers. Consumers pay more than Rs 45 for small-value orders in Bengaluru everywhere from Rs 16— the base price. Previously, the company had released deliveries beyond a certain cap.

In Bengaluru, Zomato has added up to Rs 25 surge fees on orders during peak hours, and Rs 11 delivery fees on its meal-for-one service, which was previously free. “The fee has been introduced for food delivery in tandem with the maturity as well as sector growth,” said a spokesperson for Zomato. Swiggy has also raised delivery charges in selected small towns and cities and decreased delivery charges at selected locations during the night.

The company also increased its delivery fees over the course of the year, charging Rs 31 for delivery of orders under Rs 98, and Rs 21 for deliveries in Bengaluru beyond that amount. The company previously had a maximum delivery charge of Rs 20 and did not charge more than a certain amount for orders. “Our overall focus remains on enhancing the customer experience in terms of both pace and preference. While in some cases we have increased delivery fees, we continue to offer Super Subscription to customers seeking convenience and affordability,” a Swiggy spokesperson said.

The two dominant players have also begun to pass on restaurant packing fees and certain taxes to customers over the last six to eight months and cut down on losses per order. According to research firm RedSeer Consulting, the average discount on food tech platforms has shrunk by 200 basis points since mid-2019.
Swiggy has risen rates of its Super Program by 20 percent on the loyalty board. The business is paying now 349 A three-month membership, up from previous Rs 179. Zomato’s loyalty program, Zomato Gold, has also hiked rates. The service launched at For a year, 999 will now cost Rs1,800, an increase of 80 per cent. Zomato had previously offered Gold at just Rs 299 for three months. “We had raised the price of Zomato Gold after discussion with the restaurant industry,” the Zomato spokesperson said.

The combination of increased costs passed on to consumers and discounts being slashed has slowed the overall growth of the sector. RedSeer Consulting estimates that the food ordering market in India will grow by just 35% in 2020, reaching 1.5 billion orders, expected to be its slowest pace of growth in the last five years. This is a sharp reduction from the 205% growth in 2019 when it hit 1.1 billion orders, the analyst quoted earlier in the story said.

Swiggy has started charging higher commissions from restaurants in regions where its service is close to maturity, as it shifts focus to monetise its core food ordering business. Zomato, who bought Uber Eats to strengthen its presence in the southern markets, follows in his wake as well.

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Pritish raj

Pritish raj

Pritish Raj is a content writer at Next Big Brand. Hailing from the diversified state of Bihar, he is an engineer by education who chooses the way of poetry, photography, and writing to kick off his career. Highly enthusiastic about brands and startups, he aims to be a travel content creator.

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