Zomato’s stock is zooming at the moment, but what’s also zooming are the hidden charges and fees on its platform.
Zomato has begun charging a “Convenience Fee” of as much as Rs. 30 on dining out orders for Zomato Gold users. Zomato Gold users get lucrative discounts when eating out at restaurants if they book a table in advance. But while Zomato still has the discounts, it’s now adding a convenience charge of Rs. 30 on some orders.
This is a departure from how Zomato Gold used to earlier function, which had straightforward rules — users could simply book a table on their apps, and then earn a straight discount on their total bill. But a few weeks ago, Zomato had begun applying a Rs. 5 “convenience fee” to the final bill.
Other users reported having seen a Rs. 10 “Convenience Fee” on their bills.
But it appears that Zomato has now ramped up its “Convenience Fee” to Rs. 30 per order. While the fine-print might’ve mentioned that Zomato could charge a Convenience Fee while users were signing up for Zomato Gold, the existence of this fee — and its increases — haven’t been communicated to users, and only people who bother to go through their bills in detail will even come to know that Zomato’s levying the Convenience Fee.
Zomato knows it can afford to to this. There are only a handful of services in the dining-out discount space including Zomato Gold and EasyDiner, so it’s not as though users can easily switch to a service that doesn’t charge a convenience fee. Also, Zomato users typically save much more than Rs. 30 on their restaurant bills while eating out, so using Zomato Gold, even with the Convenience Fee, is still cheaper than not using the service.
This convenience fee on Zomato Gold orders isn’t the only instance where Zomato has looked to quietly increase its take-rate on orders. Last year, Zomato had first introduced a Rs. 2 platform fee on delivery orders, and over the last few quarters, has increased it to Rs. 3, Rs. 4 and Rs. 5, and now is charging as much as Rs. 6 as a platform fee for orders. Zomato appears to have utilizing a similar strategy with its dine-out orders, raising the convenience fee from Rs. 5 to Rs. 10 and now to Rs. 30.
The motivations for Zomato ramping up its convenience and platform fees are clear — Zomato is now a public company, and needs to demonstrate increased profitability with the rises in its stock price. Zomato seems to be slowly ramping up its fees to determine the price elasticity and the reaction from its customers — as long as users remain indifferent to these price increases, Zomato will be able to keep raising rates, and only stop when it determines that the additional revenue won’t make up for its loss in business because of the increased prices. But even though Zomato is currently levying fees of as high as Rs. 30 per order, it would do well to be careful — high prices could open the doors for competitors like ONDC in food delivery, and EasyDiner in dining out, to swoop in and eat its lunch.