Zomato, the food delivery platform is also setting foot on the same path as Swiggy, and is rolling out a “platform fee” of Rs 2 per order. This platform fee is levied irrespective of the cart value, and comes at a time when the company hopes to remain on a profitable path after it reported its first-ever quarterly profit in Q1Fy24.
The additional charges have only been rolled out to select users for now, and have not been introduced on Zomato’s quick-commerce platform, Blinkit. According to Zomato, it is a small fee that helps them pay the bills so that they can keep Zomato running.
A Zomato spokesperson also stated that this is an experiment for now. He said,”This is in an experiment phase right now, and we may or may not scale.”
According to a note by JP Morgan, while a platform fee of Rs 2 may look small as it only represents 0.5 percent of Zomato’s average order value (AOV) of around Rs 415, it would still amount to a large corpus, analysts said. Zomato delivered around 17.6 crore orders in the June quarter, which translates to roughly 20 lakh orders a day.
An internet sector analyst said, “Most customers won’t even notice the small increase (of Rs 2) in their total bill, but because of Zomato’s large volumes, the fee will create huge value for the company. Zomato needs to show profitability to stakeholders and that will only happen when someone pays them extra, it has to either be the restaurants or the customers. Restaurants have however resisted and shown no appetite for an additional fee of any sort and they will revolt if the system is changed. So, customers now have to pay an extra fee.”
Restaurants pay food delivery companies like Zomato and Swiggy with a commission of 22 to 28 percent on food orders. And like Swiggy, Zomato is also levying a platform fee for both regular users and the ones under Zomato Gold, its loyalty programme.
It was further added byt the analyst,“Also, Zomato knows Swiggy charges a platform fee and has noticed that Swiggy’s volumes were not hit. A company is either forced to make decisions on its own or will follow competition just because of positive results”
However, on August 3, during Zomato’s call with analysts after its results when it was asked if there was a plan to roll out a platform fee and if they tried it in some micro markets, the company had different views.
Akshant Goyal, Zomato’s CFO said,“It’s a business call. We’re aware about that [peers charging a platform fee] and we’ll take a call if we think it’s the right thing for the business. At this point, we haven’t done that. There’s no platform fee on our platform.”
A surprise net profit of Rs 2 crore was posted by Zomato in the three months to June, helped largely by the reversal of a tax amount. Even without that, the company’s financial metrics – GOV, revenues, transacting user base and delivery costs, among others had also improved in the quarter, indicating better times for Zomato and its shareholders.
