After doubling platform fee on food delivery, Swiggy to increase delivery charge on Instamart orders

After doubling platform fee on food delivery, Swiggy to increase delivery charge on Instamart orders

Food tech and grocery delivery major Swiggy is looking at ways to increase the delivery fee charged to customers who place orders on Instamart, the company's quick commerce arm, to improve the unit’s profit profile, chief financial officer (CFO) Rahul Bothra told analysts on December 3.

“In the overall delivery fee construct, today there is a certain amount of subsidy that goes into the business, both through the subscription programme (Swiggy One) as well as getting users acquainted (with) this new service. Over time there is expectation to increase the delivery fee,” Bothra told analysts after announcing the company’s quarterly results. He, however, did not provide any specific timelines for when the change is coming.

To be sure, delivery is free only for Swiggy One (loyalty programme) users and the others have to pay a dynamic fee. Market leader Blinkit, owned by Zomato, collects a delivery fee on every order and does not have a loyalty programme. Zepto, another key player in the space, also waives off the delivery fee for Zepto Pass (loyalty programme) users but collects a fee from the others, similar to what Swiggy Instamart does.

Bothra was addressing queries around how the company plans to improve its take rates, or commissions, from around 15 percent currently to 20-22 percent in the future, from the Instamart business. Bothra added that monetisation by running ads on the platform is another way margins will improve over time for Instamart.

Instamart is one of Swiggy’s most important divisions and had an adjusted revenue of Rs 513 crore in Q2FY25, up from Rs 240 crore during the same period last year. That compares with Blinkit's revenue of Rs 1,156 crore, indicating that Swiggy has to make up ground.

At the overall company level, Swiggy saw its revenue grow to Rs 3,601.5 crore during the July-September period, an increase of 30 percent from Rs 2,763.3 crore recorded during the same period last year. The company also saw its losses narrow 5 percent from Rs 657 crore to Rs 625.5 crore during the period.

Platform fee hiked to Rs 10

CFO Bothra’s comments come at a time when the competitive intensity in the quick commerce space is increasing and companies are innovating to push up average order values (AOVs) and turn profitable at a faster pace.

It also coincides with the company's move to constantly increase the platform fee on food delivery orders. Swiggy had started collecting a nominal platform fee of Rs 2 per order, irrespective of the customer profile and order size, back in April 2023. Since then, it has only taken the platform fee higher to make each order more profitable than the previous one.

In around 18 months, the platform fee has gone up 5X from Rs 2 to Rs 10. The company had tested a higher fee a few months ago and stuck with the higher fee after it saw desired results.

In fact, even its rival Zomato has followed suit. While the Gurugram-based company had said it is only charging a platform fee as high as Rs 10 during the festive season rush, it has been collecting the same amount even after the festive season as it improves profitability, a move even Swiggy has replicated.