1st May, 2023: What is platform fee? Read to know about it.
In an effort to reduce expenses, the biggest online food delivery service, Swiggy, has started charging all customers a "platform fee" of Rs 2 each purchase, regardless of the amount of the cart. Initially introduced for users in Bengaluru and Hyderabad, the extra fees are currently only applied to food orders. The platform charge serves primarily to keep the platform functioning smoothly and to maintain and develop new features for it.
According to research, Swiggy has not yet implemented these fees in major metropolitan areas like Delhi and Mumbai. Only for food delivery is there a platform cost. Whether or not they are Swiggy One clients, it differs from the handling charge assessed on Instamart orders.
Even though Rs 2 might seem insignificant, analysts said it would generate a sizable enough collection for Swiggy to reinvest back into its company as it currently delivers over 1.5 million orders daily. The tax, which went into effect gradually over the last week, is probably going to be expanded to other areas.
The economic downturn in the delivery industry is the primary cause of the move. Swiggy’s chief executive and co-founder Sriharsha Majety mentioned in an email, “The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally)….While our cash reserves allow us to be fundamentally well positioned to weather harsh circumstances, we cannot make this a crutch and must continue identifying efficiencies to secure our long-term.”
The inclusion of additional fees will probably assist Swiggy in reducing its high cash burn (cash burn is the rate at which a company spends its available cash.) which is much higher than what its competitor Zomato was burning.
