swiggy Business Model – How does swiggy make money

People have the luxury to order anything online and get it delivered to their homes. This is not a new thing in today’s world. Moreover, it has only been increasing in the last few years. No one has to tell you on how Amazon has made its founder the world’s richest man. You can just look at the major e-commerce websites and understand why they are thriving. It is because people are liking the trend of getting orders delivered to their homes. They love the idea that they can press a few buttons on their mobile screen and get anything done. Many companies have understood this and are trying to do the same with the services they offer. You can find a lot of products and services that are trying to deliver you the services at your doorstep. One can notice the emergence of new startups that do the same.

You must have noticed that food delivery services are becoming more and more popular in recent times. Before a decade only a few franchises like Dominos would deliver food to people’s homes. But they would only deliver pizzas and not any other food. Some people have thought what if all the restaurants in the city could do the same. So they started coming up with this idea of just having a service that solely focuses on delivering food from the restaurants to people’s homes. Soon many food delivery services have started popping up in different countries. There are food delivery services like GrubHub in the USA and Deliveroo in the UK. You can find the Zeen article that explains the business model of Deliveroo. Similar to Deliveroo, Swiggy is the food delivery service that is rapidly expanding in India. A country with 1.3 billion people is loving this idea.

What is Swiggy?

As mentioned earlier Swiggy is a food delivery service that operates in India. This platform has become quite popular among people of all age groups who are living in cities. But this was not always intended to be a food delivery service. The founders of Swiggy had other plans before it ventured into the food delivery market. Sri Harsha Majesty and Nadan Reddy who are two of the founders of Swiggy first created an e-commerce website that provided shipping and courier services in India. They wanted to get into the food delivery market so approached Rahul Jaimini who was formerly working for Myntra. It was at that time the company was rebranded as Swiggy, the food delivery service that people are familiar with. Swiggy was launched in the year 2014 with its headquarters based in Bangalore  When Swiggy entered the market food delivery market was at its lowest. 

All the major food delivery services were suffering losses and some of them shut down. Swiggy started rapidly growing by building a good delivery network. Within five years of its inception, it started operating in more than 100 cities in India. The major reason for its popularity was its success in big cities like Bangalore, Mumbai, Delhi, and Hyderabad. Before Swiggy arrived not many people in India used to order food online. But now there are hundreds of thousands of people who are ordering food from this delivery app. Even Swiggy has managed to adapt to different cities it operated in. It did not just offer services all around the city but slowly built its network around the cities. With a population as huge as India’s, Swiggy had a lot of market share to capture. Looking at the business model of Swiggy might give an idea of how it works.

Business model of Swiggy

Just like Deliveroo, Swiggy’s business model is a hyperlocal on-demand business model. This means that it provides food delivery services in local areas of the city on-demand.  In order to do this, it has to partner up with the restaurants. Not only that it has to hire local staff that is keen on delivering food at all times of the day. This seems easy on paper but not so much in reality. The reason for this is that people and especially restaurants in general in India are not so familiar with the concept of food delivery services. So convincing them to join hands with Swiggy is a difficult task. Because most of the big restaurants are hugely popular in their locality and experience a massive flow of customers every day. Even the takeaways are huge in numbers. So if they try something new like this may disturb their daily routine.

But Swiggy pulled it off. Let’s look at the two major pillars of its business model. 

Restaurant partners

Restaurants are the first thing Swiggy focuses on when it decides to provide its services in new cities. They have to get the best and most popular restaurants in the city on board if they want to see success. So they go to each restaurant and ask them to partner up with them. They will explain the benefits of partnering with them and the potential to grow their business. The other thing they do is ensure the restaurants that they will see guaranteed results after some time. They provide restaurants with technology that allows them to take the orders as soon as they are placed online. 

Not only that but the Swiggy does not demand the restaurants to provide the food to delivery boys in a fixed time. If the restaurants are busy then they can take a little longer to prepare the food. So there is no pressure on the restaurants in terms of making food. Not only that, a person can only order food from the restaurants that are their areas. There is a limit on the distance. So you could only order if you are within a certain radius of the restaurant. This is how it manages to efficiently deliver food people.

Delivery partners

The other main component of the company is its delivery partners. If you want to sustain in the food delivery service market in India then you have to be at your A-game. You have to provide the best service if you want to survive. To ensure this you have to have delivery partners that are ready to deliver food in all circumstances. So if you expect them to deliver food no matter the situation you have to make sure they get all the things that are necessary. Swiggy promises high pay to its delivery partners for the first few months. In the first months of their job, they get paid a lot. This makes sure that they are loyal to the company. 

They not only get paid to deliver food but they also get to keep the tips given by the customers. These tips are given by customers at the time they order food. Not only that but they also get incentives for delivering x amount of orders. This will motivate them to deliver food maximum number of times as they would not get the amount of money they received when they got hired. The delivery partners are given an app that receives notifications as soon as they are assigned to deliver an order. It will show them the restaurant at which they have to pick up the order and the address at which they have to deliver it 

How does Swiggy make money?

Swiggy is currently the largest, most popular, and valuable food delivery service in all of India. It generates a revenue of over $120 million dollars every year and the number is only increasing. You might be wondering how it makes all the money. Let’s take a look at it.

Delivery charges

Swiggy charges some money for delivering food to the customers. At first, it did not do this as they to get a hold on the market. But after they established themselves they started charging a minimum amount of money to deliver food. They had to do this because they don’t have any minimum order policy which makes it hard for them to earn money on food that is less than ₹100. So they have to charge a minimum amount for delivering food. They usually charge ₹20 for delivering orders. Apart from that, it charges extra money during the time of high demand. This is done at the time of rain or other occasions.

Commissions

This is another way in which Swiggy earns its income. It will charge commissions from the restaurants on the total bill. The commission depends on various factors like the city, restaurant, and frequency of orders received. They don’t demand much commission if they are trying to penetrate into a new market. Swiggy only charges 2% to 3% if they are operating in a new city. But if they are well established in the city they charge anywhere between 10% to 15% commission on the bill.

Advertisements

Apps like Deliveroo advertise restaurants for free so that the restaurants can get more money. But Swiggy does the complete opposite. They charge restaurants to promote them on the opening page. The restaurants should pay Swiggy if they want their restaurants to be shown as soon as people open the app. You will have to pay more if you want your restaurant to be at the top of the list. 

Subscription

It also earns money through its subscription plan called Swiggy super. This subscription offers many advantages to people who pay for this. Customers will get free delivery on orders above ₹99 and many other discounts that other public do not have access to. It has one month and three-month membership. 

Conclusion

This is the business model of India’s largest and most successful food delivery service. It is a combination of brokerage and subscription business models. Currently, Swiggy offers its services in more than three hundred cities and towns in India. It is keen on expanding its services to other regions. Apart from the mentioned above services it also makes money by being an affiliate to banks.

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