ETtech Explainer: Why are ecomm, food delivery firms hiking platform fees ahead of festive season?

Ahead of the festive season, food delivery and ecommerce majors are raising platform fees levied on users to offset higher operational costs and improve margins.

Food delivery platform Swiggy increased its platform fee to Rs 15 from Rs 14, a day after rival Zomato hiked its fee to Rs 12 from Rs 10. Online fashion retailer Myntra has also raised its fee to Rs 25 from Rs 20, right before the festive sales kick in.

Simply put, a platform fee is a flat charge levied on every order and goes directly to the companies.

ET breaks down the recent hikes and why they matter to consumers and platforms.

How much has the fee gone up?

Swiggy and Zomato’s latest hikes take their platform fees to Rs 15 and Rs 12, respectively. Swiggy’s fee is inclusive of GST, while Zomato’s excludes it. Swiggy is deploying the hike selectively across regions, while Zomato has rolled it out nationwide.

Both players have steadily raised fees since mid-2023, when they first introduced them. Swiggy began with Rs 2, gradually moving up to Rs 12 before this round. Zomato has followed a similar path.

Interestingly, rival Rapido’s food delivery app Ownly has so far chosen not to charge any platform fee as a customer acquisition tactic.

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Why now, ahead of the festive season?

Historically, platforms have used festive peaks to push fee hikes. Last year, both Zomato and Swiggy raised their fee from Rs 7 to Rs 10 during the season, before retaining the higher rate even after demand tapered.

“The strategy of raising platform fees ahead of the festive season and retaining the higher rate later has been in place since last year, when the fee was increased from Rs 6 to Rs 10,” said Karan Taurani, executive vice president at Elara Capital. He added that the platform fee has increased nearly six times since its introduction on Zomato.

Analysts note that customers tend to absorb these changes more easily during peak spending periods, giving companies a window to push such hikes without a significant drop in orders.

“As both Swiggy and Zomato focus on profitability, an increased platform fee helps them meet higher seasonal costs,” explained Satish Meena, founder of a Gurugram-based market research firm. “Demand for temporary workers is high during this time of year, and companies need to pay additional costs to retain them.”

Why are ecommerce companies charging similar fees?

Myntra has raised its platform fee to Rs 25, while Flipkart and Amazon India are also charging a Rs 5 marketplace fee on all orders. People aware of the matter said Myntra’s increase is part of an ongoing experiment ahead of the festive rush.

“During the festive season, when customers are shopping more and availing heavy discounts, tolerance for a nominal fee is higher,” said Meena. “After seeing the willingness of customers to pay platform fees in food and quick commerce, online retailers are now testing it as well, since this fee directly improves margins.”