Platform fees had started off as an inconsequential addition to the overall bill on food delivery orders, but over the months they’ve quietly metamorphized into quite a substantial tax.
Zomato has raised its ‘platform fee’ to Rs. 10 from the Rs. 7 it was charging previously. “This fee helps us pay our bills to keep Zomato running. To maintain services during festive season, it has increased slightly,” Zomato’s app said.
The idea of a platform fee was first introduced by Zomato’s arch rival Swiggy in April 2023, when the company had begun experimenting with a Rs. 2 platform fee for orders. Not long after, Zomato had introduced a platform fee of its own of Rs. 2 per order. By August 2023, Zomato had raised its platform fee to Rs. 3 per order, and starting 1st January 2024, Zomato had raised its platform fee to Rs. 4 per order. In April 2024, Zomato has raised its platform fee to Rs. 5 per order, which was later raised to Rs. 7 per order. Zomato has now said it will charge a platform fee of Rs. 10 per order. This represents a 400 percent increase in the platform fee in the last 18 months.
This platform fee can significantly improve the profitability of both companies. Zomato currently receives around 20 lakh orders per day, so a Rs. 10 platform fee on each order can help it make an additional Rs. 2 crore per day. This adds up to Rs. 730 crore per year. In the last quarter, Zomato had reported a profit of Rs. 226 crore, so an annual platform fee of Rs. 730 crore could significantly improve its margins.
Zomato and Swiggy have been very clever about how they’ve introduced the platform fee. Just a year ago, the fee had started off at Rs. 2 per order, which wouldn’t have worried most customers, or affected their ordering patterns. The companies clearly saw no decline in orders, and looked to double down, and increased the fee to Rs. 3, and then to Rs. 4. The fact that these companies now have set the platform fee at Rs. 10 shows that the platform fee is having no impact on orders, and even if it is, it’s more than offset by the Rs. 730 crore the fee is earning the companies annually. And given how things have been so far, it’s likely that the platform fee will keep increasing until it begins affecting the demand for the two food delivery players.