Ordering From Swiggy Or Zomato? Think Again; You Might Be Paying A Premium Of As High As 50 Per Cent For Their Service
The argument of this piece is not that food delivery apps are ‘looting‘ the customers.
It’s to show that customers are paying a hefty premium ranging from 10 per cent to 50 per cent depending on the outlet they are ordering from.
Food delivery apps may have just been a convenient way to get your bite before the Covid-19 pandemic, sparing one the hassle of going to the restaurant after a long day at work.
These apps have now become nothing short of an essential service over the last one year.
With food joints effectively turning into cloud kitchens due to various restrictions on in-person dining, these delivery apps have been a saving grace for many and the only source of income for many a youth.
In the current crisis, delivery agents have played a role which should ideally be classified at par with those of frontline workers.
More importantly, this business model couldn’t have been more suited for a time when social distancing, lockdowns and night curfews have become the norm.
However, it’s important to understand the hefty premium customers are paying for the services provided by these food delivery apps.
Here’s a comparison of the final price of a ‘Big 8’ chicken basket order from KFC while ordering via delivery apps as compared to the price at the restaurant.
On the issue of discount, it’s pertinent to note that Zomato is offering it for all on orders above Rs. 149 and that’s the reason why I have added it here.
However, this is for the duration of IPL and it’s temporary. Without this, the order value will be higher than what Swiggy is charging.
As one can see, the difference in prices is not simply due to delivery charges which is Rs 30 at Swiggy (because a KFC outlet is less than 2 km from my place. It would’ve been Rs 40 if the distance exceeded that limit) and Rs 34 at Zomato.
Customers wouldn’t feel the pinch for this and would readily pay that amount.
Plus, regular customers can simply take monthly subscriptions offered by these apps and save money in the long run.
Where the apps are going to be hauled over the coals by consumers is the difference in menu prices they are displaying.
The Big 8 at a KFC outlet is priced at just Rs 503, while apps are showing a price of Rs 589.52 — a 17 per cent increase. Not just that, there is a stark difference in taxes too.
While at a KFC outlet, one only pays the GST of Rs 25 (at the rate of 5 per cent), customers are paying taxes of over Rs 64 and Rs 66 respectively on Swiggy and Zomato — around 11 per cent, more than double the rate of GST — that too on an inflated price of order.
The taxes charged by these apps are almost always double that of the GST. In the app, the half of this amount is shown as ‘restaurant packing charges’ but interestingly, this packing charge somehow remains the same as the GST and keeps increases in proportion to it as the order value increases.
If the GST on an order is Rs 50, then packing charges are also 50.
If it’s Rs 25, then packing charges also are in the same proportion.
Anyway, here is another comparison, this time for an order from a small standalone food outlet which isn’t famous like KFC with multiple chains and brand recognition.
Swiggy’s premium shoots up over 48 per cent when it comes to this small, standalone outlet.
Zomato‘s does too, but due to the temporary IPL discount, it’s at 28.7 per cent.
One should also note that the order value here is smaller. For bigger orders, the premium will only increase.
This trend of charging extra — over actual price menu, in the form of charges additional to GST, etc — can be seen across the board — from top food chains to small outlets.
There are some restaurants like Sagar Ratna for which one finds the same prices on the restaurant menu and on the apps. For such outlets, the premium is quite low and one has to pay only the packing charges and delivery fee as extra.
It would be too simplistic to blame these delivery apps for such a hefty difference in final order prices.
These platforms have been mounting losses every year and only recently have been given hope to become sustainable thanks in no small part due to Covid-19 which has ensured their average order price shoots up as even affluent customers have been ordering online from posh outlets.
Additionally, Swiggy and Zomato have clarified that the inflated prices on their apps (compared to menu prices at the restaurant for same orders) are set by the restaurants themselves.
However, that may be due to apps themselves which charge restaurants a commission fee as high as 30 per cent on orders just as a service for their outlet to be listed on these platforms.
While big outlets can still afford to pay (plus they don’t need the visibility of online platforms as much), the smaller ones get squeezed more for they are not only charged more commission but are also forced to push discounts and advertise on these apps which further impacts their revenues so much so that many have begun to revolt against the food aggregators.
Nonetheless, the argument of this piece is not that food delivery apps are ‘looting‘ the customers, as many accuse them of so readily without understanding how difficult the business model of food aggregators is, it’s to show that customers are paying a hefty premium ranging from 10 per cent to 50 per cent depending on the outlet they are ordering from.
Armed with this information, it’s now up to the customers to decide if that’s something fair or too costly.
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