Food and grocery delivery platform Swiggy is reportedly considering an increase in delivery charges for its quick commerce arm, Instamart, as part of its strategy to boost profitability. According to a report by Source, Swiggy’s CFO, Rahul Bothra, discussed these plans with analysts following the company’s Q2 FY25 results announcement on December 3.
Swiggy currently subsidises delivery fees for Instamart orders through its loyalty program, Swiggy One, and promotional discounts for new users. Swiggy One members enjoy free delivery, while non-members pay dynamic delivery fees. However, Bothra revealed plans to gradually increase delivery charges, although a timeline for these changes has not yet been disclosed.
Swiggy operates in a highly competitive market alongside players like Blinkit, owned by Zomato, and Zepto. Notably, Blinkit does not offer free delivery, whereas Zepto provides free delivery to its loyalty program members. Swiggy’s move to adjust delivery charges could be seen as a step toward aligning its pricing model with competitors while maintaining profitability.
In addition to raising delivery fees, Swiggy is exploring other revenue-generating strategies, including:
Increasing Platform Fees: The platform fee for food delivery orders has already increased fivefold, from Rs 2 to Rs 10 per order, in the last 18 months.
Monetising Instamart Through Advertisements: This move is expected to leverage the platform's growing user base to attract advertisers.
Improving Take Rates: Swiggy aims to increase commissions on Instamart orders from the current 15% to 20-22%.
Instamart has shown significant revenue growth, recording adjusted revenue of Rs 513 crore in Q2 FY25, more than double the Rs 240 crore earned in the same period last year. However, it still trails behind Blinkit, which reported a revenue of Rs 1,156 crore during the same quarter.
At the company level, Swiggy posted a 30% year-on-year revenue increase, reaching Rs 3,601.5 crore in Q2 FY25. The company also managed to narrow its losses to Rs 625.5 crore, compared to Rs 657 crore in the same quarter last year.
Swiggy’s strategic fee adjustments aim to drive higher average order values and faster profitability. CFO Rahul Bothra highlighted that these changes, coupled with other measures, are part of a larger plan to enhance margins and ensure long-term sustainability in the competitive quick commerce sector.
The market responded positively to Swiggy’s performance and strategic announcements. The company’s shares surged by 7% in early trade, reflecting optimism from brokerages about its future growth prospects.