The company has suspended its Intercity Legends service, which let consumers in different cities to place orders with renowned eateries in larger cities.
Digital Desk: Online food delivery platform Zomato increased its platform cost by 25% to Rs 5 for every order. Food delivery companies charge a set cost called a "platform fee" to all of their consumers for all orders.
The food delivery platform shares on Monday climbed 5 percent to Rs 197.80
In an effort to increase its margins and turn a profit, Zomato reinstated a Rs 2 platform fee in August 2023. The charge was then raised by the company to Rs 3 and then to Rs 4 on January 1. On December 31, it had temporarily raised the platform cost to Rs 9.
As the company’s share price reacted positively to the development in January, analysts said that the platform fee hike would partially offset the impact of GST on delivery charges.
Zomato processes between 85 and 90 crore orders a year. EBITDA might benefit by Rs 85–90 crore, or around 5%, from an increase in each Re 1 convenience fee across all regions. But as of right present, this hike only applies to a few cities.
Intercity Legends Service Suspended
The company has suspended its Intercity Legends service, which let consumers in different cities to place orders with renowned eateries in larger cities. On clicking the ‘Legends’ tab on the Zomato app, it says, “Enhancements are underway. Please stay tuned as we will be back to serve you soon”.
According to those with knowledge of the situation, Legends did not gain much traction with users in its most recent incarnation. Legal problems also arose.
When the service was first introduced in 2022, food would be delivered to a designated group of cities from a few eateries in particular towns. Zomato made adjustments to the model the previous year in order to expedite the supply of pre-stocked commodities from other cities.
Zomato's Head of Intercity Delivery, Siddharth Jhawar, left the company just three months after the intercity delivery service became live.
A resident of New Delhi filed a lawsuit against Zomato in a district court earlier this year, arguing that the company was only delivering pre-stocked goods from surrounding warehouses while having promised delivery from well-known eateries in other cities. The legal case is still pending.
An estimated 85–90 crore orders are fulfilled by Zomato each year. Zomato revealed an increase in adjusted revenue of 30% year over year for the December quarter.
A GST demand and penalty order of Rs 11.81 crore for July 2017 through March 2021 was recently received by the company. The order is divided into a penalty of the same amount and a GST demand of Rs 5.9 crore. The directive was given by the Central Goods and Services Tax Additional Commissioner, Gurugram, and applied to export services that Zomato supplied to its overseas companies between July 2017 and March 2021.
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