A small fee for users, a big move for Zomato?

livemint.com:

₹2-3 per order on its app on a pilot basis. The “small fee" has been introduced to “help us pay the bills so that we can keep Zomato running," the food delivery app’s order section shows. According to the company, the platform fee will be applicable for all its customers.

“We are still in experiment stage, and are gradually rolling it out across India," said the company. Prima facie, this is encouraging as it can potentially benefit margins. Remember that it was just in the June quarter (Q1FY24) when Zomato clocked a consolidated net profit for the first-time ever.

Near-term gains may not be significant, though. “It is expected that Zomato would implement the platform fees across cities and gradually evaluate if there is any impact on demand. There is also a possibility that the platform fee may increase in the future," said Nikhil Choudhary, assistant vice president-equity research, Nuvama Institutional Equities.

The fee should improve Zomato’s customer delivery take rate. The company charges a fee from restaurants and customers for facilitating an order. Broadly, when this fee is expressed as a percentage of gross order value (GOV), it is known as take rate.

Over the past few quarters, Zomato’s restaurant take rate has risen whereas the delivery take rate has fallen (see chart alongside). Eventually, better take rates aid margin. Recall that Zomato reported 2.7 million high-frequency customers in 2022 that had an annual ordering frequency of more than 50.