Due to record food orders on New Year’s Eve, food delivery platform Zomato increased its mandatory platform fee to ₹4 per order from ₹3. As of January 1, the new rates were in effect.
On New Year’s Eve, Zomato temporarily increased its platform fee to as much as ₹9 per order. Shares of the company opened high on Tuesday (around ₹126 in the morning) after CLSA remained bullish. In August last year, Zomato introduced a ₹2 platform fee to increase profits.
On January 1, the company increased the platform fee, which is applicable to all customers, including Zomato Gold customers.
The company has used this as a margin lever – in addition to advertising revenue, delivery charges and higher restaurant commissions – to improve profitability. There are about 85 to 90 crore orders made by Zomato every year – an increase in each Re 1 convenience fee will result in an increase in EBITDA of 85 to 90 crore, which is about 5% of the total EBITDA,” says Karan Taurani, Senior Vice President at Elara Capital and Research Analyst.
He notes, however, that constant increases in delivery/platform fees may result in lower order volume growth, and one should monitor this potential effect.
On New Year’s Eve, Zomato and its quick commerce platform Blinkit saw their highest orders and bookings ever.
We delivered almost as many orders on New Year Eve 23 as we did on NewYear Eve 15, 16, 17, 18, 19, 20 combined. Excited about the future!” Zomato Founder and CEO Deepinder Goyal wrote on X(twitter).
Albinder Dhindsa, CEO of Blinkit, said the company crossed the total number of orders it received on NewYear Eve 2022 only in the evening.
We have already reached the highest-ever number of orders in a day, OPM (orders per minute), soft drinks and tonic water sold in a day, chips sold in a day, and tips given to riders in a day (thanks, India).
In the meantime, Zomato received notices from the tax authorities in Delhi and Karnataka regarding the alleged underpayment of goods and services tax (GST).
The tax demand notices will be appealed by Zomato.
Zomato received a show-cause notice from the goods and services tax authorities regarding unpaid dues collected as “delivery charges”.
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