Swiggy Vs Zomato: Platform Fees In Focus Amid Profitability Strategies

The landscape of India's online delivery platforms with its sizzling competition is seeing a fascinating shift in platform fee strategies. While Zomato Ltd. maintains an established fee, Swiggy Ltd. has surprisingly opted for a reduction, that contrasts with the company's profitability focus.Axis Capital maintained its 'buy' rating on key players Swiggy and Zomato, as the brokerage dives deep into platform fee trends and potential for fee hikes. Shares of Swiggy were trading 0.58% higher, compared to a 0.12% advance in the benchmark Nifty 50 as of 10:54 a.m. While Zomato stock was trading 1.22% lower around that time..The latest analysis from Axis indicates a noticeable divergence in platform fee strategies. The focus is primarily on Swiggy and Zomato, that are key players in the food delivery space. Zomato has consistently retained its platform fee at Rs 10 per order, maintaining its previous structure. However, Swiggy has implemented a reduction, lowering its fee from Rs 10 to Rs 6. The brokerage calls this strategic shift by Swiggy unexpected, especially considering the prevailing emphasis on enhancing profitability within the food delivery sector, to balance the losses in quick commerce. .Zomato, Swiggy At Discount — Food Delivery Being Ignored Versus Quick Commerce, Says ICICI Securities.According to Axis Capital, despite the fierce price discount competition, platform fees have exhibited relative stability in the quick commerce segment.Notably, Blinkit has increased its platform fee from Rs 7 to Rs 11, while Instamart and BBNow have maintained their respective fees at Rs 8 and Rs 6, according to Axis. Zepto's fee has remained rangebound at Rs 11, slightly reduced from Rs 12. These fees may not be uniform across all users. It can fluctuate based on factors like usage frequency and propensity to pay, the brokerage said..The gradual implementation of platform fee hikes by Zomato and Swiggy, throughout 2023 and 2024, demonstrates a feasible approach to revenue generation. Both platforms have consistently raised fees, observing minimal impact on order frequency, said the brokerage. Zomato and Swiggy's platform fees have remained within the range of 0.5-2.3% of the average order value. The brokerage suggests that there is potential for further fee increases. This is because the pace of these increases presents an upside risk to its current estimations. Zomato's introduction of a feature allowing users to adjust their fee between Rs 10 and Rs 40 is highlighted by the brokerage. These add to the platform's strategic efforts to leverage fees for enhanced profitability..When compared to other platforms that charge similar convenience fees, food delivery and quick commerce fees remain relatively low, Axis noted.Convenience fees in ticketing and travel typically range from approximately 5-11% of the total price. In contrast, food delivery platform fees stand at around 1 to 2%. Further, quick commerce fees for platforms like Blinkit and Instamart are even lower, at approximately 1.5%.Factors such as order frequency and ticket size influence these charges. This hints that there is still scope for platform fees to increase in the medium term for both food delivery and quick commerce sectors, Axis said..Stock Market Today: Nifty, Sensex Snap Two-Day Gaining Streak As Infosys, NTPC Share Prices Drag

Swiggy Vs Zomato: Platform Fees In Focus Amid Profitability Strategies

There is still scope for platform fees to increase in the medium term for both food delivery and quick commerce sectors, Axis said.

NDTV Profit

NDTV Profit

Follow Us

DOWNLOAD THE APP