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On Swiggy charging a “surge fee” to deliver food on holidays


Online food delivery startup Swiggy plans to charge Rs 20 per delivery on food orders placed on holidays, festivals and rainy days, when the availability of delivery boys is low, according to a Mint report. The report adds that the charges will be paid to its delivery personnel, supposedly providing them incentive to work on order-heavy days (which usually tend to be weekends, holidays etc.). This is being called a ‘Surge fee”, as indicated in the tweet below, and comes at a time when there has been a heated discussion on the validity of surge fees in India.

We’ve written to Swiggy for more details. What we have so far:
– It is testing this in Bangalore and Hyderabad but plans to extend it to all its cities of operation including Pune, Mumbai, Chennai and Delhi.
– Mint states that Swiggy previously tested charging a delivery fee of Rs 30 in October 2015 and increased its minimum order value from Rs 150 to Rs 250. Currently, it does not claim to have a minimum order value, at least in Pune.

MediaNama’s take:

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1. Not surge pricing: Swiggy’s ‘surge fee’ is not the same as the surge pricing for taxi apps because the fee isn’t variable and/or dependent on the demand-supply algorithm. It is more of a convenience fee levied on customers.

2. Are delivery personnel similar to taxi drivers who use apps for bookings? In a conversation with a Swiggy delivery person yesterday, I learnt that delivery personnel have to use their own bikes, and pay for fuel themselves. He told me that for Pune, the average monthly charges for fuel went to Rs 4,000. Delivery personnel are also paid weekly, in a manner similar to how Uber transfers money to drivers.

However, Ola and Uber drivers have the flexibility to log on and off the platform any time they choose. It’s not clear if Swiggy’s delivery personnel have the same flexibility or if their work is more full time (fixed working hours). If they have fixed working hours, the surge fee may not be enough motivation to make more deliveries during their working hours.

The other thing to keep in mind is that the taxi space is regulated: the pricing for regular taxis is standardized, and no surge pricing is allowed. In case of food delivery, the space is entirely regulated, and there is little precedence: the online versus offline battle won’t happen here.

3. The choice between making money and getting larger volume: Swiggy’s surge fee reminds us of what Jugnoo founder Samar Singla said last month when the company stopped surge pricing on its autorickshaw booking service: “Higher the price, lower the demand, helps prioritising travel, which means only a person really needing the service will pay the surged price and rest will find other ways.” If delivery services don’t charge someone for the delivery, they lose money (think of PepperTap shutting down operations).

4. Who should pay for the delivery charges? Ideally, it makes sense for Swiggy to charge the surge fee to the restaurant because, firstly, Swiggy is getting the restaurant business it wouldn’t have gotten otherwise, and secondly, because it saves the cost it incurs on running the establishment when people come to dine in: the margins are likely to be higher in case of delivery than in case of people dining in. We’re wondering if Swiggy is trying to make money from both the customer and the user here.

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