Zomato has introduced a new update in the Indian online food delivery market. They have increased their platform fee by 25%, now charging Rs. 5 per order. This change, effective from April 20, signifies another positive move in the company's evolving pricing strategy to enhance earnings and efficiently manage operational costs. The increased fee applies to several major cities, including Delhi NCR, Bengaluru, Mumbai, Hyderabad, and Lucknow, which will impact a significant portion of its customer base.
Zomato's decision to raise its platform fee comes amidst growing financial pressures and the need to enhance profitability. The company, which handles between 2 and 2.2 million orders daily, introduced the platform fee first in August 2023, starting at Rs. 2 and subsequently increasing to Rs 3 by January 2024. This latest increase to Rs. 5 is expected to substantially boost Zomato's revenue, potentially offsetting challenges such as significant tax demands from GST authorities, which have amounted to over Rs. 402 crore.
Despite the increase, Zomato continues to offer perks to members of its Zomato Gold loyalty program, such as discounts and free delivery, although these benefits come with an upfront payment, and the platform fee remains applicable. This fee structure is similar to that of its chief competitor, Swiggy, which also charges a Rs 5 platform fee.
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Further complicating its business landscape, Zomato has recently paused its intercity delivery service, Legends, due to poor consumer reception and legal challenges. Initially launched to deliver renowned dishes from specific cities directly to consumers, the model shifted to delivering pre-stocked items, which did not resonate well with the customer base. This service adjustment followed the resignation of Siddharth Jhawar, the head of Zomato's intercity delivery.
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Amidst these transformations, Zomato disclosed its third consecutive quarterly profit for the period of October to December, demonstrating a substantial improvement over the Rs 347 crore loss it incurred during the corresponding period of the prior year. Consolidated operating revenue of Rs 3,288 crore, an increase of 69% year-over-year, signifies the organization's resilient expansion in spite of operational complexities.
Additionally, Zomato strengthened its standing within the digital payments industry. The company obtained authorization to function as an online payment aggregator from the Reserve Bank of India in January. This development occurred subsequent to its partnership with ICICI Bank in the introduction of Zomato Pay.
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By undertaking this strategic shift, Zomato not only expands the scope of its operations but also minimizes reliance on external payment applications, which may result in reduced transaction expenses.
Zomato has implemented a broader strategy to adapt to the ever-changing market conditions and regulatory environment, which includes the recent increase in platform fees. Zomato endeavors to sustain its competitive advantage and ensure enduring viability through strategic initiatives such as adding digital payment capabilities and aligning its pricing with market demands. As the organization moves through these intricate challenges, the future of consumer loyalty and market share in relation to these modifications is yet to be determined.