Food To Cost More On Zomato: Online food delivery platform Zomato has hiked its platform fee by 25 per cent to Rs 5 per order. Platform fees is the flat charge that food delivery companies charge from all customers across orders.
The food delivery platform shares on Monday climbed 5 per cent to Rs 197.80
In August 2023, Zomato introduced a Rs 2 platform fee back when it looked to boost its margins and become profitable. The company subsequently increased the fee to Rs 3 before raising it again on January 1 to Rs 4. It had temporarily hiked the platform fee to Rs 9 on December 31.
As the company’s share price reacted positively to the development in January, analysts said that the platform fee hike would partially offset the impact of GST on delivery charges.
Zomato caters about 85-90 crore orders annually. An increase in each Re 1 convenience fee across all geographies could lead to a positive impact of Rs 85-90 crore on EBITDA, which is around a 5 percent positive impact on EBITDA. However, this hike is effective only in some cities as of now.
Intercity Legends Service Suspended
Meanwhile, the company has paused its Intercity Legends service that delivered orders from top restaurants in major cities to customers in other cities. On clicking the ‘Legends’ tab on the Zomato app, it says, “Enhancements are underway. Please stay tuned as we will be back to serve you soon”.
In its latest avatar, Legends did not see significant traction among consumers, people aware of the matter said. It also faced legal issues.
The service, which was launched in 2022, initially saw delivery of food happen from select restaurants in certain cities to a specific set of cities. Zomato tweaked the model last year to deliver pre-stocked items from other cities with a shorter delivery timeline.
Barely three months after the intercity delivery service was launched, Zomato’s head of intercity delivery, Siddharth Jhawar, resigned from the company.
Earlier this year, a New Delhi resident filed a case against Zomato in a district court challenging the company’s promise of delivery from renowned restaurants in other cities, when it was delivering pre-stocked items from nearby warehouses. The matter is still in court.
Zomato reportedly caters about 85-90 crore orders annually. In the December quarter, Zomato reported a 30 percent on-year jump in adjusted revenue.
The firm recently received a GST demand and penalty order totaling Rs 11.81 crore for the period of July 2017 to March 2021. The order is split into a GST demand of Rs 5.9 crore and a penalty of the same amount. The order was issued by the Additional Commissioner of Central Goods and Services Tax, Gurugram, for export services provided by Zomato to its foreign subsidiaries between July 2017 and March 2021.
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