Swiggy's 2% collection fee causing dispute with restaurants: Here's why
Swiggy, a leading food delivery service, has stirred up controversy with restaurants by announcing a 2% collection fee on all orders starting December 20, reports the Economic Times (ET). The National Restaurants Association of India (NRAI), which represents over 5,00,000 businesses nationwide, labeled the decision an "unwelcome distraction" and plans to seek clarification from Swiggy. Sagar Daryani, NRAI's Vice President and Founder of Wow! Momo chain, claimed that Swiggy's move is "nothing but a way of indirectly increasing commission costs."
Restaurants concerned about profitability amid high commission costs
Riyaaz Amlani, Managing Director of Impressario Entertainment & Hospitality, voiced concerns about the collection fee's impact on profits. He pointed out to ET that "costs of delivery are already higher than dine-ins, with commissions charged by aggregators at 25-30%." Amlani emphasized that raising these costs further directly affects profitability. Swiggy's competitor, Zomato, already imposes a payment gateway fee. In 2020, both Swiggy and Zomato set a record by delivering over 5,00,000 orders on New Year's Eve.
Experts suggest data utilization for improving unit economics
Karan Tanna, CEO of Ghost Kitchens, proposed that aggregators could leverage data to enhance unit economics instead of hiking fees. He suggested that "smart menu engineering and catalog optimization will help to increase ticket sizes and that will improve unit economics for aggregators and restaurants." Tanna added that sharing insights on better menu engineering and pricing for specific items, combos, and add-ons could boost unit economics. This strategy would maximize data utilization, an aspect currently underexploited in the industry.
