Ordering goods from online food delivery and quick commerce platforms (e.g. Blinkit, Zepto) can be expensive. Due to the ongoing tension between America and Iran and rising prices of crude oil, the prices of petrol and diesel in the country have increased by about ₹ 4 per liter i.e. by 4%. This has increased the pressure of delivery cost on companies like Swiggy and Eternal (parent company of Zomato). According to the report of Ilaya Capital, the increase in fuel prices is having a direct impact on the margins of companies. Companies can pass the burden of this additional expense on to customers. Due to this, the delivery charge or other fees for each of your orders may be increased. Zomato-Swiggy had increased the platform fees in March itself. Between 2023-2026, the platform fees on Zomato and Swiggy increased 9 times. On March 20 itself, Zomato had increased its platform fee by 19% i.e. ₹ 2.40 to ₹ 14.90 (without GST). At the same time, Swiggy had increased the platform fee on every order by 17% from March 24. Instead of Rs 14, users are now paying Rs 17.58 (including GST) i.e. Rs 3.58 more as platform fee on every order. Companies’ expenses may increase by ₹ 1.20 per order. According to the report, at present the average delivery expense of companies for quick commerce (delivery in 10 minutes) is ₹ 35 to ₹ 50 per order. Whereas for food delivery, the cost comes between ₹ 55 to ₹ 60 per order. Overall, the average blended cost of the companies is ₹45 for Eternal and ₹55 for Swiggy per order. Fuel usually accounts for around 20% of the total delivery cost. Accordingly, the cost of fuel per order comes to ₹ 9 to ₹ 10. Due to the recent increase of 4%, companies are incurring a loss of around 44 paise per order. The report warns that if petrol and diesel prices increase from ₹4 to ₹10 per liter in the coming months, this pressure will increase by ₹1 to ₹1.20 per order. Swiggy’s profits may be impacted by up to 12%. If companies do not pass on the burden of this increased expense to customers and bear it themselves, then their profits will be severely impacted. According to the report, in the worst case scenario, there could be a negative impact of 4% to 5% on Eternal’s adjusted EBITDA and 10% to 12% negative impact on Swiggy’s profit in the financial year 2026-27. Experts say that this impact may be more visible on Swiggy, because Swiggy is still struggling to bring its quick commerce business to break-even. Eternal (Zomato), on the other hand, has a much larger scale and a strong ad revenue base. Additionally, its customers are slightly less price-sensitive, putting it in a better position to recover costs. Gig workers may increase their demand for payment. The increase in fuel prices has a direct impact on those delivery partners (gig workers) who deliver food or ration on their bikes. Due to petrol becoming expensive, their daily savings reduce. In such a situation, delivery partners can demand from companies to increase the payout per order. If companies do not increase payouts, dissatisfaction among delivery partners may increase and the supply chain may be affected. The burden of increased prices will be divided in three ways. The report has estimated that in the financial year 2026-27, Eternal can handle 2.7 billion (270 crore) and Swiggy can handle 1.4 billion (140 crore) orders. Companies can divide the burden of expenses on such a large scale into three different parts.
Source link
[ad_3]
Online food and quick commerce delivery can be expensive: Due to cost of petrol and diesel, companies will increase delivery charges, margin reduced by 10-12%
