Recently, Swiggy, the prominent food delivery service based in Bengaluru, raised its platform fees by approximately 17%, bringing the total to ₹17.58 (after taxes). This adjustment came just days after Zomato increased its platform fee to ₹14.90 (before taxes) per order.
This trend is not coincidental; it reflects a consistent pattern observed since the introduction of platform fees. In 2023 alone, both companies have raised their fees eight times, often in close succession. What began as a modest ₹2 charge has now escalated to a double-digit fee, representing an over 600% increase in less than three years.
The timing of these hikes typically aligns with the start of the financial year and high-demand periods, such as festive seasons. This strategy indicates a shift from experimentation to optimization, as both platforms seem to be identifying the maximum price consumers are willing to accept.
Platform fees are particularly appealing because they generate high-margin revenue with minimal incremental costs. Unlike delivery charges, which are partly shared with gig workers, platform fees contribute directly to profit margins. For instance, Zomato's parent company reported ₹327 Cr in platform fee revenue in FY25, while Swiggy generated ₹222 Cr during the same period.
As these companies face scrutiny from investors, the predictability of high-margin revenue streams from platform fees becomes increasingly valuable. However, a pressing concern arises: can they enhance their unit economics without perpetually increasing these fees?
While the justification for rising fees often hinges on escalating operational costs, this narrative falters under scrutiny. Typically, technology platforms benefit from economies of scale, meaning costs should decrease as order volumes rise. Moreover, advancements in automation should ideally lower operational expenses.
Both Swiggy and Zomato appear to be navigating a complex identity crisis. They position themselves as technology-driven platforms to justify pricing power but behave like logistics-heavy businesses when discussing costs. This ambiguity raises questions about what consumers are truly paying for.
Despite the rising fees, consumer demand has remained stable, suggesting a strong attachment to these services. This resilience creates a cycle where companies feel incentivized to continue increasing fees as long as demand holds steady. Industry insiders speculate that platform fees could soon reach ₹20 per order.
In this duopoly, the synchronized fee hikes resemble a coordinated pricing strategy, raising concerns about market competition. Regulatory bodies may need to investigate these patterns as they significantly affect millions of consumers daily.
As Swiggy and Zomato continue to push the envelope on pricing, the critical question remains: how much more are consumers willing to accept before they push back against these rising platform fees?
