Swiggy, an Indian online food delivery giant, recently raised its platform fee from Rs 2 to Rs 3. As per the report of The Economic Times, Swiggy’s confirmed that they are providing a Rs 2 discount once the platform fee reaches Rs 5, which indicates that the fee could rise further in the coming months.
Apart from Swiggy, its rival Zomato also levied its platform fee of Rs 3 ahead of the competition and high operation charges. However, customers with a Swiggy One membership can still avail of free food and grocery deliveries after making an upfront payment. It might also affect the market demand and the company’s unlisted share price. This blog will discuss why Swiggy increased its platform fee amid high customer demand.
Reasons Behind Swiggy’s Decision To Increase Platform Fee
As per the data shared by the company, Swiggy delivers approx 1.6 million orders a day. The decision to increase the platform fee comes at the moment when Swiggy’s food delivery business is largely flat in terms of growth. In an internal note to employees, Swiggy’s Co-founder Sriharsha Majety said, “Food delivery business growth had not been in line with projection.”
Currently, the company focuses on the double-down of its e-commerce and grocery delivery businesses. In between this, high platform fees also negatively impacted Swiggy share price in the unlisted share market, which declined after the company confirmed this decision. Here are the major reasons why Swiggy decided to increase its platform fee amid high customer demand:
Improving Unit Economics
According to the information shared by Prosus, Swiggy’s total loss in 2022 increased by 80 per cent, around $540 million. The company is now looking to overcome this loss and improve its unit economies by implementing the new platform fee for the food delivery business. Through this, Swiggy will expect to charge a high fee on each order.
Covers The Increasing Cost
With the high cost of managing customer orders and restaurant food delivery, Swiggy’s overall cost of online food delivery business increased rapidly. Due to the low share on each delivery, Swiggy’s delivery boys also went on strike, which brought the company a huge loss. As a result, the company decided to increase platform fees.
The company is looking to improve its financials, like operating revenue, net profit and Swiggy’s share price ahead of its IPO. After seeing the huge customer demand, Swiggy leveraged its favourable market conditions and decided to charge a high number of customers for each order.
Swiggy Accelerates Its Business Growth In The Future
Swiggy is people’s top choice for online food ordering and delivery, which allows the company to experience high demand. The new platform fee might not negatively impact Swiggy’s customer base. In addition, the executives will also focus on converting new customers into Swiggy One members by giving early discounts. For investors, the company also brings exciting investment opportunities. You can easily buy Swiggy unlisted shares by using Stockify India’s trusted online trading platform. Here, you will get an accurate Swiggy share price and other financial details.