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Eyeing Profitability, Swiggy Increases Commission Rates

I for one always passionately believed that sanity will eventually prevail on cash burning Indian startups, as and when the consolidation drive will kick start. And therefore Techpluto wasn’t least surprised when it learnt that Swiggy has not only started charging more commission from restaurants but also increased its delivery fees (paid by its customers).  This news was broken by Economic Times, which cited several sources as well as quoted a statement from Swiggy to back its claim.

ET report claims that the Bengaluru based foodtech major is charging more commission from new restaurants than the older ones, while the report also claimed that higher charges are being leveled on restaurants operating in high density areas. The charges have been raised from nominal 12-18% to 18-23% of the total order book, the report further claimed after quoting unidentified sources.

The foodtech major is also aggressively pushing restaurants to advertise on its platform, since it is one of the major sources of revenue.

The news of Swiggy increasing commission has come at a time when the entire foodtech sector is deep into the consolidation mode. And as I had hinted early on that consolidation brings a sense of rationalization, with companies sharpening their focus on important metrics like monetization, cutting burn rates, unit economics so and so forth.

Coming back to consolidation in foodtech sector then the consolidation signs were clearly evident since last year itself. Especially when the ride-hailing majors Ola and Uber decided to cut back on investments in the food delivery business, with the latter being reportedly in talks to sell its food delivery business to either of the incumbent market leaders – Swiggy or Zomato.

Zomato, on the other hand, is also obviously pursing the tough task of bringing down its cash burn rate. The Gurgaon based company managed to bring down its cash burn rate from $ 45 Mn to $20 Mn in March last year, while it will be a major challenge for the company to continuously lower down the rate.

In 2020, Techpluto foresees that Swiggy and Zomato will not leave any stone unturned in rationalizing their balance sheet further. Following years of operation, both companies have now entered maturity zone after painstakingly building a scalable business and value based ecosystem. Not to mention their respective investors will also continue to exert pressure that will force both these companies to continue with their monumental exercise of bringing down the cash burn rate.

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