Swiggy hikes delivery fees, commissions in order to cut down their losses

After bleeding profusely in fiscal 2019, food delivery major Swiggy seems to be taking measures to rein in its staggering losses.

The Bengaluru-based company has been reportedly raising commissions for restaurants in select regions and asking its partners to advertise on its platforms.

“Swiggy has started charging higher commission from new and even some existing restaurants,” said an ET report quoting a fast-food chain owner listed on Swiggy.

The food delivery firm is charging a higher commission, where the density of restaurants is higher, whereas it continues to charge less in regions with less number of restaurants on their platform.

“The food delivery major has raised its charges to 18-23% of the total order value, up from 12-18% it used to charge,” added the report. Apart from increasing delivery fees it charges to customers, Swiggy is said to have started charging restaurants on a pay-per-click model for ads they run on its platform.

In FY 19, Swiggy has claimed to have grown at a faster pace with over 4X jump in order volumes and 2.7X rise in operating revenue. Though, the scale has come at a comparatively higher cost.

Swiggy’s losses climbed up to 6.1X Rs 2,345.6 crore in FY19 from Rs 385 crore in FY18.

“It is worked upon at an individual restaurant level and is in line with factors like average order value, delivery costs and other costs that are incurred. Every contract is renewed as per a pre-decided timeframe and all terms and conditions, including commissions, are mutually aligned with the restaurant partner. This is nothing but business as usual in a marketplace such as ours,” Swiggy said.

On the allegation of asking partners to advertise on its platform, Swiggy said that “the advertising solutions are a discretionary and voluntary opt-in service availed by our partners on the platform. The charges of these services are the predefined post which the partner chooses to avail the same.”

In recent years, after e-commerce and payments, food delivery has emerged as a bruising game of deep pockets.

Since the majority of the money in the food-tech space has flown to Swiggy and Zomato, they have been burning cash to achieve scale. While Zomato had last year claimed to have brought down its burn rate to under $20 million a month from $45 million, Swiggy also has been trying to cut down its burn rate in 2020.


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