How does Swiggy make money? A detailed Guide of Swiggy’s Business Model
It’s tough to imagine a world today without food delivery apps like Zomato or Swiggy, who are able to satisfy your hunger-cravings, just by the click of a few buttons. But if you dial time back a few years ago, you would definitely remember those days, when the only way to deliver food was via a phone call or collect at the restaurant itself- that is, if the restaurant menu and contact details did not get misplaced under the heaps of other papers in your drawer.
Dial time forward a few years forward, and now at the click of a button, you get restaurant menus, prices, reviews and not to forget: the ever lucrative discounts!
Nandan Reddy & Shriharsha Majety, had the vision to bring to life a piece of super-convenient hyperlocal food delivery tech in 2014 when they were just vicenarians. Someone wise once said, “Experience is the best teacher”, and boy, wouldn’t Nandan Reddy & Shriharsha Majety agree with it now.
Their first venture, Bundl, which in simple terms was a courier service for goods in India, failed within a year from its existence. I’m not going into much detail on why it failed, but you can read all about it here.
From the concept of its service, I’m sure you were able to deduce that Bundl would require a good logistics network behind for it to work, which has, I can pretty confidently say today, worked out pretty well in the foundation of Swiggy.
As Shriharsha rightly said, “Our experience in Bundl made us realise that logistics companies were pathetic at utilising technology to help their business. We took that as a cue, and wanted to start another venture with intersection of technology and logistics. We didn’t want any aggregators and build a logistics company that utilised technology to create customer delight.”
And this very thought led to the beginning of Swiggy.
But you’re here to know how Swiggy makes money. So let’s get right to it.
How does Swiggy work?
Swiggy is a hyperlocal food discovery platform that connects customers who want to order food from restaurants in their neighbourhood. Hyperlocal discovery is just a fancy term for finding stuff locally, in your immediate vicinity. (In this case, restaurants that deliver)
Swiggy provides a delivery service for customers wherein they can order desired food from a restaurant of their selection without having to visit the restaurant or leave the comfort of their home to collect the food. Super convenient, right?
All interactions & orders take place via the Swiggy’s website and mobile app, available both on Android & iOS. Customers (hungry, might I add) simply place their order on these platforms and viola! They now just got to sit back & relax (and wait) for their food to arrive!
Swiggy functions on a dual partnership model and works to benefit both restaurants and customers that sign up for their service and act as a bridge between customers & restaurants. A dual partnership model generally means having a two-sided marketplace to cater to (here, restaurants & users). However, technically, Swiggy has three layers of the process to connect and coordinate with: customers, restaurants AND delivery personnel. Because let’s face it: the food isn’t really going to deliver itself now, eh?
I’ll be explaining in-depth later below, how each of these three faces of the same coin contributes to Swiggy’s revenue model. But first:
How does Swiggy make money?
A HUGE chunk of Swiggy’s revenue comes from commissions. They collect certain fees from restaurants for firstly: generating sales leads (literally flooding them with customer orders) and secondly: providing them with a logistic system and delivery fleet to deliver orders. Restaurants have to pay 15% to 25% for every order placed from Swiggy’s platform.
The percentage of the commission depends on various factors like the frequency of orders received location of the restaurant, dependency of the restaurant on Swiggy, percentage charged by competitors, penetration to a new city etc.
Just an interesting fact: Swiggy on an average, gets about 1.2 – 1.4 million orders per day. The average Swiggy order value per customer is known to be INR 243. Multiply these two and yikes! That’s a lot in commissions.
If you were the CEO of Swiggy now, wouldn’t this be your first move too?
The 2000’s have borne witness to the fact that advertisements are now one of the most common sources of revenue, the common denominator, if I may, to almost every company’s cashflow out there. Swiggy is no exception to this fact. Swiggy has three types of advertising on its platform:
- Banners: Swiggy enables brands & restaurants alike to display their advertisements on its app or website in the form of a carousel, and also on their ‘Order Tracking’ screen.
- Priority Listing: Those who have used Swiggy’s app or website can play testament to the fact that they have seen restaurants appear at the top of their list, marked as ‘Promoted.’ These are restaurants that want to be included higher up in Swiggy’s list of available restaurants in the area, and pay a premium to Swiggy for giving them higher priority in its displayed listings. The higher a restaurant is on the displayed list the more chance it has of gaining customers.
- Video Ads: In absolute premium cases, Swiggy displays video ads (just like your good-old TV adverts) on its platform.
3. Delivery charges
To a large extent, we are all are aware that food delivery platforms such as Swiggy charge a delivery fee depending upon the amount of your order. This is charged partly to cover the expenses of the delivery guy’s expenses, and the rest to cover other operational costs.
Swiggy’s delivery fee ranges anywhere from INR 25-50 for orders less than INR 99 in value, and INR 20 for orders INR 100 and above. Do note, the delivery fee varies depending upon the city. Swiggy also raises the charges during high order demands or unusual weather conditions. Don’t you hate when that happens?
Now, let’s have a mathematical discussion.
From the data I have collected so far, we’ll explore further into these logistic costs, by answering a very simple question:
How much do Swiggys’s delivery guys earn?
Quickly deep-diving into the numbers:
A Swiggy delivery guy earns anywhere between INR 45 per delivery + INR 30 per hour worked + an INR 200 bonus if they work 8 hours in a day + an INR 50 bonus if they work 5 hours at a stretch.
This is really difficult to estimate per rider, as everyone operates on a different level of efficiency & determination. So, to make things easier, on an average, we can safely say that a Swiggy rider earns a total of about INR 900-1000 per day.
And FYI: As of 2019, the total number of Swiggy delivery riders in India is about 60,000 spread across 15 cities.
I leave the math to you.
4. Swiggy Access
Another new avenue to Swiggy’s business model that was initiated keeping the future in mind is Swiggy Access. This offering enables restaurants to set up kitchens in new locations and allow the food to be delivered to customers as fast as possible. Swiggy Access is poised to be a long-term contributor to how Swiggy makes money in the future.
For example, let’s say that you have a pizza joint based out of Mumbai. For fun’s sake, this joint is unique with respect to its concept & menu and is doing great & earning the big bucks in Mumbai. Now, you invest some resources into market research and it turns out, there’s an equivalent demand & potential for your pizza joint concept in Bengaluru, theoretically poised to make a killing there too.
Here’s where Swiggy Access comes in. Swiggy Access kitchens work on a plug-and-play model wherein you just have to bring in equipment and simply start rolling out operations. It’s that simple. An added advantage is that restaurants part of this offering do not pay rent and will get free access to advertising AND be able to leverage Swiggy’s data insights and consumer feedback.
Isn’t that really cool for your hypothetical pizza joint?
Next, come the relatively not-as-cool ones.
5. Swiggy Super
Emulating the successful Zomato Gold initiative, Swiggy also offers customers a membership program which they can pay for called as Swiggy Super. The benefits? If Zomato Gold gave you 1+1 or 2+2 on food & drinks, Swiggy Super provides unlimited free delivery on all orders and no surge charge pricing for customers of this membership[. It’s currently available as a one-month membership or a three-month membership and the cost varies according to the chosen membership plan and city.
6. Affiliate income
Swiggy has partnered with banks and Credit card companies like American Express, ICCI, HSBC Citibank etc. Swiggy earns affiliate income from such companies by selling credit cards to customers and helping banks to give credit card offers to customers using the app, during checkouts. (Those offers that you see if you use a particular card, sigh!)
Well, after due research & diligence, these are the PRIMARY sources of revenue that are known of Swiggy’s revenue model. Do you have something to add to this? Hit me up in the comments below!
- Headquarters & Year Launched: Bangalore, 2014
- Founders: Sriharsha Majety, Nandan Reddy and Rahul Jamini
- Revenue: 875 crores; Losses: 1,960 crores
Swiggy Funding History:
- Series A– $2 million led by Accel Partners & SAIF Partners
- Series B– $16.5 million led by Norwest Venture Partners, Accel Partners & SAIF Partners
- Series C– $35 million led by RB Investments, Harmony Partners, Norwest Venture Partners, Accel Partners & SAIF Partners
- Series D– $15 million led by Bessemer Ventures, Norwest Venture Partners, Accel Partners, Apolleto Asia & SAIF Partners
- Series E– $80 million led by Naspers
- Series F– $100 million led by Naspers, Meituan-Diamping
- Series G– $10 million led by Naspers, DST Global