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Update: Swiggy sent us a statement which said, “Pune is one of the fastest growing markets for Swiggy. Swiggy charges a city-specific delivery fee at times where the order value is less than the defined threshold value. In Pune, specifically, there has been a reduction in this fee from Rs. 30 to Rs. 25.”

9 December: Online food delivery platform Swiggy has started charging a delivery fee of Rs 25 on all orders below Rs 250 in Pune, the company said in an email (full text of email below). It is unclear if the delivery fee will be pocketed by Swiggy or go to the delivery personnel. We’ve written to the company for more details and will update this when we hear from them.

 

swiggy-deliveryOn face value, the delivery fee in Pune looks like a way of monetisation for the company, given that margins in the food delivery business are pretty low. This won’t be the first time that Swiggy has introduced a fee though: In May, the company started charging a “surge fee” (more of a convenience cost) of Rs 20 for orders placed on holidays, festivals and rainy days, when the availability of delivery boys was low. The cost would apparently be paid to the delivery personnel to incentivise delivery during high demand times.

One of Swiggy’s unique selling points when it launched was that it did not have a minimum order value. However, again, this seems to be unsustainable as the cost of delivering may exceed the cost of a low ticket size order. The company currently does not have a minimum order size but we imagine it now prefers to charge its users for low ticket sizes than deliver it for free.

Interestingly, my colleague Vivek Pai has noticed that sometimes, platforms like Foodpanda and Swiggy show different prices for the same items on menus of restaurants in Pune. Take Chaitanya Paranthas for example. The first screenshot is from Swiggy and the second from Foodpanda:

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Note that in April, Swiggy claimed to have made 1 million food deliveries, that it received an average of 35,000 orders daily (up from 1,000 daily deliveries in April last year) and was growing at 25% month on month and. In October last year, Swiggy had tested a delivery fee of Rs 30 and increased its minimum order value from Rs 150 to Rs 250, but this was not live in Pune.

The discounting game is costly

The online food ordering business in India was propelled by Foodpanda, which, at the start, offered massive discounts and failed to sustain that momentum when it stopped the discounts. Interestingly enough, last September, Zomato’s COO Surobhi Das told MediaNama that ‘discounts were not a business model for the company.’ More recently, Zomato’s co-founder Deepinder Goyal said that despite there being 3 players in the food delivery domain in India, they didn’t have more than 6-9 months left (that’s till February 2017).

This September, Swiggy raised $15 million in a Series D funding led by Bessemer Venture Partners and existing investors. With this, the company’s total funding was up to $75.5 million.

Our online food ordering coverage here.

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