Quick commerce apps stack up extra fees to curb losses

Time of India

12 hours ago

ETtech
ETtech
Quick commerce companies have begun adding a range of fees — from platform and handling charges to convenience, small-cart and rain levies — to customer orders in an attempt to shore up their unit economics, or earnings from each transaction, according to industry executives and analysts.A check across the top five quick commerce apps shows these charges, which come on top of the standard delivery fees and vary across cities and platforms, range between 6 and 30 per order.On its app, Zepto says it levies a handling charge 'towards handling of products in your orders at our stores', while rival Blinkit says this fee goes towards ensuring 'proper handling' and 'high-quality quick deliveries'. Zepto and Instamart offer bulk orders at discounts.Both platforms charge a higher handling fee on large baskets.There is also a surge fee, charged during high-demand hours or when there is a shortage of delivery workforce and the order value is below certain thresholds. Eternal Ltd-owned Blinkit, Swiggy 's Instamart and Zepto control 80–85% of India's quick commerce market.These fees are not unusual in the consumer internet ecosystem. Companies in segments including food delivery, online travel, movies and event ticketing and big ecommerce platforms such as Amazon and Flipkart also levy similar charges.For the quick commerce segment, however, these fees assume significance given the rising competition in the sector, which has resulted in the top three players, as well as others like BigBasket's BBnow and Flipkart Minutes, increasing discounting to all-time high levels, as reported by ET on June 16.Most platforms have also raised the minimum order value to unlock free deliveries, which again suggests that platforms are pushing customers towards higher AOV (average order value) purchases, analysts at brokerage firm JM Financial wrote in a research report. 'These service fees lead to improvement of take rates for these platforms as it directly goes to revenue and subsequently leads to margin improvement.'Take rates refer to the ratio of a company's gross order value to its revenue.Industry executives said intensifying competition has prevented them from increasing delivery charges, where they continue to subsidise a gap between what they collect from a consumer and pay to the gig worker.'One of the components of expanding losses, besides expansion of the dark store footprint, is the inability to increase delivery fees,' a senior executive at a quick commerce company said. 'Right now, companies are focused on retaining their power users as much as they are going behind new customers. For most new markets, anyway companies offer a few free or discounted deliveries.'Market leader Blinkit reported an operational loss of Rs 178 crore for the January-March period, almost five times wider than the same quarter last year. Swiggy Instamart's operating loss jumped nearly threefold to Rs 840 crore in the same quarter. The parents of both Blinkit and Instamart are listed.Instamart, Blinkit, Zepto, BigBasket and Flipkart Minutes did not reply to ET's emails seeking comment.Earlier, food delivery players such as Zomato, also owned by Eternal, have reported a meaningful contribution to their unit economics from the levy of a platform fee. Zomato and rival Swiggy have increased their platform fees from Rs 2 in August 2023 to Rs 10 in October 2024. The companies have retained the fees at Rs 10 as they fear customer attrition in a market that is already witnessing sluggish growth.For the quick commerce sector, however, the market is steadily expanding, and is estimated to become $31 billion by FY28 from $8.2 billion in FY25, as per BNP Paribas.'As new platforms launch their service and as incumbent platforms enter each other's turf, they are likely to offer higher discounts initially. We expect even high-end convenience seeking users to shift in search of better bargains,' the brokerage firm said. 'Incumbents are unlikely to let go of their high-end users and will likely respond. We believe we are currently in this phase and expect this to continue for at least the next 9-12 months at least.'Eternal chief financial officer Akshant Goyal, during the company's March-quarter earnings call, said that the company would continue to chase market share for Blinkit even if it came at the cost of near-term profitability.'Platforms take commissions from brands but there is a limit to how much commission they can charge,' said Mandar Lande, cofounder and chief executive of food delivery platform Waayu. 'Meanwhile, their marketing and customer acquisition costs are rising as they are entering new markets and rising competition. So, they are levying these additional charges (such as service fee, platform fee) on the consumers.'Users have been complaining on social media about the rising costs and hidden charges. A user on microblogging site X said last month that Zepto was charging GST on item handling fee and rain fee.Notably, hidden charges have also been recognised as one of the 13 dark patterns by the central government, which in the first week of June asked consumer internet platforms to submit a self-audit of such manipulative tactics within three months to ensure they are not indulging in these practices.