Food delivery aggregator Zomato, which began charging a platform fee on orders starting last August, has successfully collected a substantial Rs 83 crore through this new levy by March, as revealed in the company’s annual report. This strategic move has been one of the three pivotal factors driving Zomato’s impressive Adjusted Revenue, which saw a remarkable 27% year-on-year growth, reaching Rs 7,792 crore in FY24.
Understanding the Impact of Platform Fee on Zomato’s Revenue Growth
The introduction of the platform fee has been a significant contributor to Zomato’s revenue surge. According to the annual report, Adjusted Revenue as a percentage of GOV (Gross Order Value) continued to rise, primarily due to three key factors:
- Increase in Restaurant Commission Take-Rates
- Improvement in Ad Monetization
- Introduction of Platform Fee from Q2FY24 Onwards
These elements have collectively compensated for the reduction in customer delivery charges per order, which were impacted by the free delivery benefit available on Gold orders.
Platform Fee: A Strategic Revenue Booster
Zomato began levying a platform fee at Rs 2 per order last August. Over time, this fee has gradually increased to Rs 6 in key markets. The strategic implementation and incremental rise in platform fee have been instrumental in boosting Zomato’s revenue. This fee, though minimal per order, accumulates significantly given the high volume of orders processed daily.
Swiggy, Zomato’s main rival, also charges a platform fee on its orders, highlighting a broader industry trend towards leveraging such fees to enhance profitability. The introduction and subsequent increase in platform fees are seen as effective measures by food delivery aggregators to bolster their financial performance.
Regional Insights: Ordering Patterns and Preferences
Zomato’s annual report also sheds light on interesting regional insights regarding ordering patterns:
- Most Late-Night Orders: Predominantly came from Delhi NCR.
- Most Breakfast Orders: Were largely from Bengaluru.
These insights help Zomato tailor its services and marketing strategies to meet regional demands and preferences, ensuring a more personalized customer experience.
The Role of Restaurant Commission Take-Rates and Ad Monetization
Apart from the platform fee, restaurant commission take-rates and ad monetization have also played crucial roles in driving Zomato’s Adjusted Revenue.
- Restaurant Commission Take-Rates: By increasing the commission rates charged to partner restaurants, Zomato has been able to enhance its revenue streams. This increase is justified by the extensive reach and customer base that Zomato provides to these restaurants.
- Ad Monetization: Improvement in ad monetization has further bolstered revenue. By optimizing ad placements and enhancing targeting capabilities, Zomato has made its platform more attractive to advertisers, leading to increased ad revenues.
Zomato Gold: Balancing Free Delivery with Profitability
One of the notable points in Zomato’s annual report is the reduction in customer delivery charges per order due to the free delivery benefit available on Zomato Gold orders. While this benefit enhances customer loyalty and order frequency, it necessitates other revenue-enhancing measures like the platform fee to maintain profitability.
Future Prospects: Sustaining Growth Amidst Competition
As Zomato continues to innovate and adapt to market dynamics, the sustainability of its revenue growth will depend on several factors:
- Customer Retention and Acquisition: Ensuring a loyal customer base while attracting new users through competitive pricing, diverse offerings, and exceptional service.
- Technological Advancements: Leveraging technology to enhance user experience, streamline operations, and introduce new features that meet evolving customer needs.
- Strategic Partnerships: Building strong partnerships with restaurants and other stakeholders to expand its network and offer a wider variety of choices to customers.
Conclusion
Zomato’s strategic implementation of the platform fee, coupled with increased restaurant commission take-rates and improved ad monetization, has significantly boosted its revenue in FY24. The platform fee, though a small charge per order, has proven to be a substantial revenue generator, contributing to the company’s 27% year-on-year growth.
With insights into regional ordering patterns and a focus on balancing free delivery benefits with profitability, Zomato is well-positioned to sustain its growth amidst competitive pressures. As the food delivery landscape continues to evolve, Zomato’s strategic initiatives and adaptive approach will be key to maintaining its leadership position.
Read More: OSTP Media | Tech, Auto, and Trending News