With Hidden Costs Of Convenience: Food Delivery Platforms Quietly Raise Household Expenses

Ever thought how the “convenience” of ordering food at home can actually make a dent in your household budget?

As food delivery platforms are gaining popularity in India over the last few years, consumers are increasingly turning towards them, as they are putting convenience on a priority basis while simplifying their meal decisions quickly. While these platforms provide easy access to a range of cuisines, consumers are not often fully aware of the intricacies of the pricing structures followed by these platforms.

These platforms often have hidden costs embedded within them which affects the household budgets over time. These costs might not seem huge at first, but the cumulative effect over a period of time leads to a toll on the consumers’ purses, as highlighted by a recent report by The Mavericks India.

Consumers are more likely to accept dispersed, smaller fees than a large lump sum, which potentially explains the cost breakdown of these aggregators, who generate an average ecosystem cost of Rs 9,000 to Rs 11,000 crore through premiums only.

Rs 46 Premium Per Order
The aggregator platforms add a Rs 46 premium on average per single item order (of value approximately Rs 400) when compared to the restaurant’s own delivery channel, revealed the report titled ‘Food Delivery Unwrapped: uncovering hidden costs on India’s aggregator platforms’ by The Mavericks India.

The report estimated that around 2-2.3 billion orders are placed annually on three aggregator platforms (Zomato, Swiggy and MagicPin) and taking the Rs 46 average premium, the overall ecosystem cost ranges from Rs 9,000 to Rs 11,000 crore.

Household Financial Loss Of Rs 12k/Year
As most of these platform users are based in metro and tier-1 cities and the conservative estimate states that an average individual places five orders a month, an individual incurs an annual financial loss of Rs 2,800 on aggregator premiums. As the average household size in such metro cities has been estimated at 4.4, the loss translates to roughly Rs 12,000 annually for a household as per the conservative estimate stated in the report.

200 per cent More Delivery Fees
Despite facing scrutiny over its pricing strategy, the food aggregator industry has been causing customers to bear the brunt of increased fees, especially from delivery charges. As per the report, the aggregator platforms charge 150 per cent to 200 per cent more amount in delivery charges.

On the other hand, around 46 per cent of restaurants don’t charge any delivery fee through their own channels. However, almost all of them charge a delivery fee when they list themselves on these aggregator platforms, as highlighted by the report.

“Food aggregators are likely benefitting significantly from the delivery partner fees, retaining a substantial portion for their own profit. While on one hand, this margin allows them to invest in growth and maintain profitability, on the other, delivery partners might face challenges related to wage expectations and operational costs,” cited the report.

Customers preferring Convenience
One of the key reasons which lead a customer to pay for these additional costs is the convenience they get from these platforms. As the customers have been prioritising ease of accessibility over manual labour, these platforms have been cashing in on the opportunity.

“The value of convenience and time savings for our customers often outweighs the higher price point, especially when they can enjoy their favourite meals quickly and hassle-free. However, we’ve also noticed that some customers are becoming more price-conscious, leading to potential hesitation in placing orders frequently”, said Puneet Kumar Kanojia, Director of BollyBites Vadapav.

Curious Case of Packaging Fee
While the food aggregators earn huge sums in the name of packaging charges, the report mentions a very crucial point. The restaurant platforms often charge a packaging fee that is Rs 2 higher than the fee charged directly by the restaurant. These platforms waive the packaging fees 23 per cent of the time as compared to the 6 to 9 per cent rate offered by food aggregators.

This points towards the fact that a customer is more likely to save more on packaging costs when ordering through the restaurant platforms. The report stated that these aggregators generate more than Rs 400 to Rs 460 crore annually via packaging premiums.

“From a strategic perspective, these pricing strategies—though potentially seen as a hurdle—are carefully designed to capitalise on the growing consumer preference for convenience. In many cases, customers are willing to absorb additional fees because the convenience of instant access to food outweighs the cost. The perception of value is enhanced when the service is reliable, fast, and seamless,” added Kanojiya.

The Membership Myth
The online food delivery platforms have been using subscription/membership models to provide certain exclusive benefits to customers such as free delivery and extra discounts among other perks. The report pointed out the subscription models which offer limited added value in terms of product pricing and delivery benefits, especially for orders above Rs 199. However, users who do not have such subscriptions can also access similar benefits without requiring any subscription.

“The primary benefit of Aggregator X’s subscription seems to lie in the promise of free delivery within a stipulated delivery radius, and yet this advantage is present for the non-subscribed users on orders above Rs 199 anyway,” cited the report.

More Branches, Lower Fees
Restaurants having more branches or chains charge lower delivery and packaging fees. “Of the sample of restaurants that have been surveyed for this report, it has been found that the restaurants that have fewer branches tend to be premium or exclusive as compared to others,” as per the report.

While it has become clear that these aggregator platforms do charge a premium amount on orders, the so-called hidden nature of such amounts does not seem much to the customers at first. The restaurants tend to charge much lower when catering on their own platforms/channels. The fierce competition in the digital space may lead to tighter price structures going ahead.

Kishan Singh

BW Reporters The author is a trainee content writer with BW Businessworld