Zomato, a prominent online food delivery platform, has made notable adjustments to its operational model, including an increase in its platform fee and discontinuation of a specific service. These changes come as part of the company’s efforts to enhance profitability and streamline its services.
Increase in Platform Fee
Initially introduced in August 2023, Zomato started with a nominal platform fee of INR 2 per order. The decision was aimed at boosting the company’s profits. Over time, this fee was incrementally raised: first to INR 3, then to INR 4 at the beginning of January, and temporarily to INR 9 on December 31st.
Now, the platform fee has been standardized at INR 5 per order. This adjustment is likely a strategic move to stabilize revenue streams and manage operational costs more effectively.
Financial Impact of the Fee Increase
With Zomato handling approximately 85 to 90 crore orders annually, the recent fee increase is expected to significantly boost its income, potentially adding an additional INR 85 to 90 crore to its earnings. Moreover, this change is projected to enhance the company’s EBITDA by about 5%.
However, it’s important to note that the increased fees have currently been implemented in selected cities only.
Discontinuation of Intercity Legends Service
Alongside the adjustment in platform fees, Zomato has also decided to shut down its Intercity Legends service. This service was designed to deliver food from top restaurants in major cities to other locations, leveraging Zomato’s extensive delivery network.
The discontinuation of this service might be indicative of Zomato’s focus on optimizing its core operations and perhaps reallocating resources to more profitable segments.
Market Reaction and Financial Performance
These strategic changes have been well-received in the market, as evidenced by a significant upswing in Zomato’s stock prices. Following the announcement, shares surged, reflecting investor confidence in the company’s revised pricing strategy and operational adjustments.
For the December quarter, Zomato reported a 30% increase in revenue, amounting to INR 2,025 crore. Additionally, revenue from Blinkit, Zomato’s quick-commerce service, also doubled to INR 644 crore.