Back in the day if you want to eat your favorite food from your favorite restaurant it was a tedious task in front of you – get ready, go to the restaurant through modern-day traffic and wait to get your table.
Instead, you decide to eat home-cooked food. Available food ordering options still have to get picked up from the restaurant.
Eating at home is the only option left after a tiring day.
All your troubles are over:
Swiggy has come to the rescue. Launched in August 2014, It made a major change in the food industry. Prior to Swiggy, only available options were food ordering services, but Swiggy looking at the opportunity introduced ordering & delivering food services at your doorsteps. A much-needed service at that point.
Let us now understand how Swiggy works and makes money by diving deep into Swiggy’s business model.
Swiggy Business Model
Swiggy is based on a business model of a well-known startup like Grubhub in the USA, a hyper-local on-demand food delivery business model. It not only aggregates restaurants but also organizes a fleet of delivery partners which deliver the food on-demand. In less than 30 minutes.
Swiggy is owned and operated by Bundl Technologies Private Limited, this unicorn startup followed the path paved by Uber and crafted a business model which relied on a dual partnership model.
Two categories of partners:
Restaurant Partners: The restaurant partners are restaurants which opt to prepare orders to deliver to the delivery partner that comes from Swiggy application and website.
Delivery Partners: They form the delivery fleet which is given the responsibility to pick up the order from the partner restaurant and deliver it to the end consumer.
How Swiggy Works?
Swiggy provides easy to use online platform for ordering from a wide range of listed neighborhood partner restaurants and have their own workforce of delivery partners who pick up the orders from the partner restaurants and deliver it to the customers comfortably at their doorsteps.
Swiggy works by providing a complete food ordering and delivery system that connects the existing neighborhood restaurants in the locality with the urban foodies proving to be beneficial for both.
You can open the Swiggy application on your mobile devices or visit the Swiggy website and you will find a whole list of restaurants to order from.
Once the restaurant and food item/s is selected and the order placed, the restaurant which has its own Swiggy application receives the order details and starts preparing for the order.
A broadcast signal is then sent to all the driver partners in the vicinity who have their own driver application. Out of them those who are willing to deliver the order can accept the request and visit the partner restaurant location to pick up food order and deliver to the customer.
Have you heard about location tracking? Like other on-demand delivery startups, Swiggy also has integrated the Google Maps API which lets the customers know where their order is and how long will take for their order to get delivered by using real-time on map location tracking.
How Swiggy Makes Money?
Swiggy’s business model gave Swiggy a head start in the food service space in India and has had a set base model on which their business is based, but they have started earning revenues from other related sources ever since they have established themselves.
Let us find out the different sources that Swiggy makes money from:-
Commissions from restaurants
Swiggy charges a commission on the full bill amount which is inclusive of the GST charged over and above the menu price. Typically charges about 15% – 25% commission on the order bill amount received by the restaurant.
Swiggy constantly tries to get restaurants on board to be available on Swiggy exclusively. On this account, certain benefits are given to restaurants like greater visibility and sometimes a drop in the commission of about 2% – 3%. But since the resulting benefit is far more than the drop in revenue, Swiggy does this aggressively.
The percent amount of commission depends on various factors like the number of orders received, restaurant locality, how much restaurant is dependent on Swiggy, percent amount charged by competitors, penetration to a new city etc.
Swiggy did not have a limitation of minimum order requirement for delivery which means that Swiggy usually received orders amounting to less than Rs 100 increasing the logistics cost per order.
So, after Swiggy became famous in the market, it started charging a delivery amount for low order values depending on location and city.
Commonly Swiggy charges Rs 20 for orders less than Rs 250. Swiggy sometimes also charges a surge in delivery prices in rush hours, heavy rains, special occasions, and festivals and also midnight delivery in some markets.
This also helps in urging customers to order above the threshold to avoid paying delivery charges.
Swiggy has two models for advertising – Banner promotions and priority listing of restaurants.
Swiggy lately started with Banner promotions following footsteps of Zomato and Foodpanda. Restaurants are promoted and displayed in their app and website relevant to those regions. Different regions on the displayed page vary in their rates based on the visibility that the restaurant is to receive from the banner promotion.
Swiggy does not share customer data with restaurants, so the restaurants rely on making raw revenue through higher visibility only.
Customers will order from those restaurants which are visible to them, Swiggy has to display a list of restaurants on its app. It has made this very potential into a revenue stream by charging a premium from restaurants in return of giving priority listing to the restaurants. Top listed restaurants have to pay more than those which list below.
Swiggy has started its own restaurants which are flashed on the app and website pages with the highest amount of visibility you can imagine. This started in Bangalore and is said to start soon in markets like Mumbai and Hyderabad.
Swiggy Access is a recently launched initiative by Swiggy. A central kitchen base-like facility which comprises of kitchens of different restaurants including Swiggy’s private labels. This cloud kitchen model is accessible to restaurants to set up their own kitchens in locations even where they are not present.
Started in Bangalore last year, it has spread over to include 30 restaurants with 36 kitchens in new cities including Kolkata, Delhi, Mumbai, and Hyderabad.
This inter-city model is prepared to be a game changer for entering into tier 2 and tier 3 cities.
Currently, in markets where it is launched, about 8% – 25% number of order comes via Swiggy Access kitchens. Restaurants on Swiggy Access have to pay higher commissions than the existing average commissions that the platform charges for delivery only.
Swiggy has recently launched a membership program for customers called Swiggy Super. It offers unlimited free delivery on orders Rs 99 or more and no surge pricing for which the customer has to pay a fixed fee.
Various options available include a one-month membership for Rs 149 and a 3-month membership for Rs 349 which are being offered at an introductory price of Rs 49 and Rs 129 respectively. This membership amount and increase in order requests, Swiggy expects to increase revenue through this membership program.
In addition to the core business practices, Swiggy also makes money in the form of affiliate income by referring credit cards of various banks to its customers. Swiggy has partnered with financial institutions and banks like American Express, Citibank, ICICI Bank, HSBC, etc. to market their credit cards to the customers.
Customers see the credit cards offers on the order tracking screen and offer section along with associated offers.
Sources Of Expenses For Swiggy
Besides the revenue streams, Swiggy also has to take a load of expenses for its day-to-day functioning. These expenses added with Swiggy’s motive to increase market share aggressively led Swiggy to lose Rs. 1.5 for every Re. 1 it earned in 2017. But, Swiggy due to its expansion strategies across the country and has gained considerable market share has led to earning Rs. 1.1 for every rupee it lost in 2018.
Various expenses in Swiggy’s business model:
Payments and incentives to delivery partners (the amount varies according to the experience, place of operation, and the number and time of delivery)
Application and website development charges
Application and website maintenance charges
Salaries and provisions to full-time employees
Advertising and marketing costs
Benefits are given to customers in the form of offers
Returns and refunds
Future Of Swiggy
Swiggy recently became the first complete online food ordering system to offer the 30 minutes or free delivery feature to customers. It is available at select restaurants in select cities but it provides convenience to a large number of customers having to wait for 40-60 minutes for their food to get delivered. Once it is completely launched – Swiggy will bear 70% – 80% of the cost in case it fails to deliver on time while the rest will be borne by the restaurants.
Swiggy also launched the Swiggy POP focusing on providing single-serve meals that provide delicious balanced meal and also save time. It is aimed for time-pressed professionals who are commuting daily and want a fool-proof mix for their daily needs.
Swiggy now added a new feature which allows customers to pre-order their meals through Swiggy scheduled. Customers can now place their orders in slots of 30 minutes, a minimum of two hours and a maximum of 48 hours in advance. This enhances the experience of those who order from Swiggy regularly and make Swiggy an essential part of their daily schedule.
With a ton of different features and host of different options provided by Swiggy, it might soon gain competitive advantage and increase its customer base as we already see happening. Moreover, due to its innovation, the growth of the company would be purely organic in nature – something that every company dreams of.
If you dream to have your own business like Swiggy then check out the Swiggy Clone that we have for you.
Do read more about Swiggy Franchise opportunities available here.