Swiggy, a leading player in the food technology industry, has implemented a 2% ‘collection fee’ on restaurants for every order. This fee is aimed at streamlining the payment process for customers using the food delivery platform.
Although the company refrained from providing an official statement on the issue, insiders have revealed that the platform has indeed started imposing the new charge. According to reports, the fee will be subtracted from the payouts allocated to the participating restaurants.
This development follows the company’s recent communication to specific partner restaurants regarding the forthcoming change.
As per a correspondence seen by The Economic Times, Swiggy said, “Commencing from December 20, 2023, we will be introducing a standardised 2% collection fee on all orders. This fee is designed to facilitate smooth customer payments on the Swiggy platform. It is important to note that this amount will be subtracted from your payouts.”
Interestingly, Swiggy is adopting a strategy similar to its competitor Zomato, which has already enforced a ‘payment gateway fee’ of around 1.8% on all orders. However, the noteworthy aspect is that Swiggy’s recent implementation of this fee comes more than four to five years after Zomato, led by Deepinder Goyal, introduced its own gateway fee.
Meanwhile, the decision appears to have stirred significant dissatisfaction among certain members of the National Restaurants Association of India (NRAI). Sagar Daryani, the vice president of the industry body and founder of the QSR chain Wow! Momo, reportedly described Swiggy’s new charges as an ‘unwelcome distraction’.
In a statement to ET, he conveyed that the ‘collection fee’ serves as a method to indirectly raise commission costs. However, the NRAI opted not to provide comments on queries related to the matter.
The imposition of the new charge is likely part of Swiggy’s strategy to create alternative revenue streams and bolster its top line in preparation for a public listing next year. Earlier this year, the foodtech major also increased its platform fee to INR 3 per order, irrespective of cart value, as a measure to enhance unit economics and elevate revenues.
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According to reports, Swiggy maintains an average order value of approximately INR 400. Therefore, a 2% collection fee would result in an extra INR 8 in revenue per order for Swiggy. This has the potential to contribute to improved unit economics for the company, aiming to present a robust balance sheet to investors when filing for its IPO papers.
According to Prosus, Swiggy’s investor, the half-yearly financial report reveals a 28% year-on-year growth in gross merchandise value (GMV) for the startup’s food delivery business, reaching $1.43 billion in the first six months of FY24.
The foodtech company also stood out as one of the Dutch investor’s top performers, boasting an impressive 7% internal rate of return (IRR) in the first half of fiscal year 2024.