While the world is debating on surge pricing by cab aggregators like Ola and Uber, Norwest Partners-backed food delivery startup Swiggy has introduced surge pricing. A rather new concept in a space where customer acquisition costs and discounting is the norm. Swiggy has introduced surge pricing for restaurants on selective occasions(select national holidays, festivals and during days of excessive rains).
Similar to the cab aggregator logic of surge pricing, Swiggy claims that the surge prices in delivery enables it to get more delivery executives on the roads during these days. In the case of Ola and Uber the surge fares reach the drivers. Similarly in Swiggy’s surge pricing, the added fee will be given to their delivery staff.
The firm is testing the model in Bengaluru. Surge pricing varies depending on demand and supply. However, in the cab aggregator space it is getting drivers online, while for Swiggy it is getting delivery boys to deliver from restaurants with high waiting time, or during bad weather conditions.
Bootstrapped till January last year, Swiggy today has three rounds of funding and is present in eight major cities, with over one million app downloads. The team claims to have over 3,000 delivery boys and 5,000 restaurants on its platform.
In a recent conversation with YourStory, Sriharsha Majety, Founder and CEO of Swiggy, told that being in the demand and supply business they are very mindful of the orders they take to ensure consistency in quality of service. Today, there are places where Swiggy has hit less than 30 minutes delivery time.
While the past couple of months have been rickety for food tech and many people talking about how there is a lack of unit economics, it is interesting to see Swiggy work towards building profitability. Swiggy was the fourth foodtech funding announcement in the year, after FreshMenu, WIMWI, and B9 Beverages.
So, while there might be a strong apprehension of the space, investors nevertheless seem to have some attraction to the space. There is also an increasing number of urban Indians who are shifting towards food delivery and non-home cooked food choices.
Also, with the surge pricing battle, we are unsure of how Swiggy intends to take this forward. Will it be a dynamic pricing model, or fixed? Will it be restricted to timings or restaurants? We are yet to see all of the different aspects.