Zomato Increases Platform Fee to INR 4, a 33% Surge from January

Zomato, a leading food delivery platform, has raised its platform fee from INR 3 to INR 4 per order across key markets, as indicated within its application interface. This price revision is set to take effect from January 1.

Ephemeral Surge in Fees on New Year's Eve

Interestingly, as per sources cited in a report, Zomato temporarily escalated its platform fees to as high as INR 9 per order in select markets on New Year's Eve. These surges were momentary and reverted to the announced rates post the event.

Business Strategies Behind the Decision

A  Zomato spokesperson, addressing the platform fee hike, mentioned that such decisions are made based on multifaceted business considerations. This move aligns with their ongoing strategy to optimize operations and sustain growth.

Record-Breaking Order Volume

Notably, Zomato encountered an unprecedented surge in order volumes on New Year's Eve, surpassing all previous records. CEO Deepinder Goyal highlighted that the orders received on that day exceeded the cumulative orders the platform had processed on New Year’s Eve over the past six years.

Platform Fee's Role in Revenue Growth

Zomato had initiated charging a platform fee for orders in August the previous year, initially at INR 2, later raised to INR 3 across major markets. This strategic move, mirrored by its competitor Swiggy, has been pivotal in enhancing revenues for food delivery platforms.

Impact on Revenues and Profitability

The platform fee, applied beyond delivery charges and inclusive of Zomato Gold and Swiggy One memberships, has significantly contributed to these platforms' financial gains. Zomato, particularly, credited the platform fee for the improvement in its take rate during the July-September quarter of FY24.

Zomato's Financial Performance and Market Response

Zomato's financial performance has showcased improvement, evident in the increase in its take rate and reported profits. The company's net profit during the quarter ended September 30, 2023, amounted to INR 36 Cr, marking a notable turnaround from the previous quarter.

Market Reaction and Future Implications

In response to these strategic decisions, Zomato's market performance remained stable, with its shares on the BSE ending trading 0.7% higher at INR 124.50 on Monday (January 1).

The Road Ahead: Balancing Growth and User Satisfaction

Zomato's platform fee hike is the latest development in a continually evolving food delivery landscape. While it strengthens the company's financial position, it also raises questions about affordability and potentially hinders user satisfaction. Balancing its need for revenue generation with maintaining a competitive user experience will be crucial for Zomato's continued success in the years to come.