Food delivery start-up Swiggy has started charging consumers a fee for orders from a few restaurants that have declined to pay Swiggy a commission, according to two people aware of the development.
The restaurants, these people said on the condition of anonymity, are among the most popular and witness maximum demand from consumers.
Swiggy’s move comes at a time when delivery start-ups in India are losing money on every order delivered. Charging for food delivery is, however, common among established delivery start-ups such as DoorDash and Instacart in the US.
Restaurants such as Meghana Foods, Corner House Ice Cream and Truffles Ice and Spice in Bengaluru have refused to pay Swiggy a commission, said one of the two people cited above. These outlets are among the top 10 restaurants on Swiggy in Bengaluru, the person added.
“Initially Swiggy was delivering for free for these restaurants, which is not sustainable in the long term. It is a kind of situation where you cannot let go of these restaurants either because they have huge demand,” said the person.
While food delivery start-ups claim to bring incremental business for restaurants for a fee, the issue raises questions on whether delivery start-ups are indispensable to growth of a restaurant. Swiggy, for instance, charges an average of 15% from restaurants on every order.
“Many established restaurants with a higher focus on dine in, or having their own model for home delivery are not dependent on food delivery platforms. These restaurants may consider them (delivery companies) only like a logistics partner and not encourage commissions for bringing in business,” said Sreedhar Prasad, partner, e-commerce and start-ups, at KPMG, India.
Swiggy cannot afford to let go of such restaurants as the high demand associated with them boosts overall transaction volumes for delivery companies.
Swiggy declined to comment on its arrangement with these restaurants.
To be sure, such restaurants are an insignificant minority as compared to the overall number of restaurants on Swiggy.
Mint could not ascertain what percentage of orders serviced by Swiggy come from these restaurants.