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Weeks ahead of Zomato's anticipated announcement of its March quarter financial results, the food delivery giant has implemented significant changes to its fee structure and services. The company's recent actions include 25 per cent increase in its platform fee and the suspension of its intercity food delivery service, Intercity Legends.
The stock prices of Zomato has been surgiung for some time. The surge in the food delivery company's stock price can be attributed to the increasing profitability of its core business and the rapid expansion of its quick commerce arm, Blinkit.
How Much Is the Platform Fee Hike?
Zomato has raised its platform fee for food delivery customers by 25 percent, now charging Rs 5 per order as of April 20. This move follows a series of incremental increases, starting from Rs 2 in August 2023, then to Rs 3, and most recently to Rs 4 on January 1. The platform fee hike is applicable in key markets such as Delhi NCR, Bengaluru, Mumbai, Hyderabad, and Lucknow. Analysts speculate that this increase aims to counterbalance the impact of GST on delivery charges.
What Does Fee Hike Mean for Zomato?
With Zomato processing between 2 and 2.2 million orders daily, even a nominal increase of Re 1 per order could significantly bolster the company's earnings over a quarter. It is estimated that each Re 1 convenience fee increase across all geographies could positively impact Zomato's EBITDA by Rs 85-90 crore, translating to approximately a 5 percent rise.Zomato Fee Vs Swiggy Fee
In comparison to its main rival Swiggy, which charges a platform fee of Rs 5 on food delivery orders, Zomato's fee restructuring places it in line with or slightly below industry standards.
Intercity Delivery Service Suspension
In a parallel move, Zomato has decided to suspend its intercity food delivery service, Intercity Legends. This service, initially launched in 2022 to deliver food from select restaurants in specific cities to designated cities, failed to garner significant consumer interest in its latest iteration. Industry sources suggest that legal challenges and a lack of consumer traction prompted this decision.
Financial Performance and Legal Challenges
Zomato's financial performance has seen fluctuations, with the company reporting its third consecutive quarterly profit of Rs 138 crore for the October-December period. However, legal challenges, such as a lawsuit filed earlier this year in New Delhi contesting the authenticity of Zomato's intercity delivery claims, highlight ongoing operational hurdles.
Regulatory Approval for Online Payments
On a positive note, Zomato last week received authorization from the Reserve Bank of India (RBI) to operate as an online payment aggregator. This milestone aligns with Zomato's strategic vision to expand its payment services and reduce reliance on third-party payment platforms.
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