CIOInsider India Magazine

Platform fee trends or platform service charges from e-commerce companies have become another added expenditure for citizens in the current economic times. Businesses are increasingly demanded to practice platform fee transparency to help consumers feel more confident in their purchasing decisions. The platform fee is not only becoming a trend among e-commerce companies but is also reflecting as another expense for the consumer. It is said that these transaction fee trends are helping businesses pay digital marketplace fees, especially when going public.

This year, Swiggy and Zomato made headlines for raising their platform fees by Rs.6 for every food order in Bangalore and Delhi, whether or not customers have membership plans. This means 20 percent more of what customers have to pay now.

Platform fees are seen as a way of keeping the budget in check and keeping the revenue flowing. Currently, Swiggy and Zomato are charging platform fees in Bangalore and Delhi. But reports claim that the two plan to take it to other cities as well.

Different Strategies by Different Businesses
Foodtech giant Swiggy was the first to introduce platform fees last year. It charged Rs.10 platform fee only for a certain number of customers in January. But this was just seen as an experiment as it was not actually charged. Meaning, at checkout, the fee was displayed, but it was lowered to Rs.5.

Then, starting this year, Zomato increased the platform fee from Rs.3 to Rs.4 per order, and then charged Rs.9 in a number of regions only on New Year's Eve. But it still increased a day after New Year’s Eve, which showed that the company’s order volume was higher than all the previous six years combined. A few months in, the foodtech major made another raise by 25 percent, entailing Rs.5 for every order. Last year, it went from Rs.2 to Rs.3, The company said that it was in an effort to boost margins and turn a profit.

On the other hand, grocery delivery major Zepto is charging platform fees for a selective number of customers at Rs.2 per order to increase revenue and operational efficiency. This strategy is similar to those of food delivery and e-commerce businesses. For its part, Zepto sees this strategy as a way to maintain its commitment to long-term and sustainable growth. Additionally, it’s alleged that it is the grocery delivery major’s attempt to stay competitive in the market by expanding its horizons.

Clearly, its strategy and commitment to meet customers’ needs seemed to be paying off when it became the third-largest player in the quick commerce field. Today, the company is able to compete on equal grounds with Swiggy, Instamart and Zomato-owned Blinkit, after gaining recognition and a market share of more than 20 percent. It credits its calculated platform fee implementation, user experience, and operational success to the rise to prominence and recognition it has garnered today.

After Swiggy and Zomato, the platform fees trend appears to be swaying other delivery services like Uber, BigBasket, Myntra, and Dunzo as well. These platforms are noted to be charging additional fees, which include handling fees, convenience charges, and more, on top of the actual delivery charge, which are usually reduced. Other moves, such as Namma Yatri's membership plans for driver-partners and Ola Prime Plus, are also seen as a way to drive revenue. Lastly, Flipkart-owned fashion e-commerce giant Myntra is also charging for returns, which is one of its primary selling factors.

One company Chose to Take it Down a Notch
That is Magicpin, a hyperlocal e-commerce app, which has reduced its platform fees by Rs 5 for each delivery. This is considered to be half of what its competitors charge. On the social media platform X, Magicpin's founder and CEO, Anshoo Sharma, said that platform fees for deliveries this year would be lowered. For the rest of this year, he claimed that there will be no increases in the cost of food delivery services. Previously, Magicpin charged a platform Rs 7 as platform fee before Deepawali and it later came down to about 29 percent. This has led to an annual increase in order volume of twice.

"We can find a balance towards the welfare of our delivery heroes and our customers during festive seasons. Hence, here is a Magicpin promise to let more people enjoy the festive season. Magicpin's platform fees slashed by 50 percent of competition to Rs 5 only for the rest of the year," Sharma said on X.

"This Diwali, we went against the current trend and took some hard platform pricing decisions. Result: More than half a million orders, love, and support were received during the long festive weekend! This is 2X of what we did last year," Sharma said in a post on X.

How Charges Work
Increasing or adding platform fees is believed to be a part of the strategy of companies to grow their profits and sustain their business models. It also matters how these companies may implement their platform fees. Some companies may experiment with higher rates in the future, while some may change them according to the demand for particular services.

The cost of the food delivery app / platform is said to be higher than the cost of your delivery's fuel. Its purpose is believed to maintain connectivity and ensure that the service is quick and effective. Your favorite restaurant may also receive a tip from this amount as well. But the reality remains unchanged: customers still have to pay more. Businesses will see a significant increase in revenue on the other hand. This is said to be a result of businesses distributing roughly 20–25 lakh orders per day. It is said to be crucial for companies as they are limited in how much they can charge restaurants in commissions, which has been a controversial topic and ranges from 25 to 35 percent.

Customers Still Have to Pay More
The bill is only going to go higher when the platform fees go up. These fees have a big influence on the cost structure of online meal orders since they are a regulated source of income for businesses.
It is anticipated that the cost of ordering food online will increase further. Swiggy and Zomato are believed to be working to improve their unit economics and overall profitability, and the platform fee increase is said to fall in line with that effort.

Are Platform Fees Good or Bad?
In a way, platform fees are bringing in more profitability for companies, which is essential for their initial public offering. However, having ethical practices over cost, transparency, and the value they provide to all parties involved in the delivery process is crucial for businesses to maintain their customer base. Therefore, it is believed that both customers and restaurants should be made well aware of any fee charges and their purpose. Food delivery charges can be fair in an ethical system when supporting the sector without unjustly hurting any player.