10 May 2016

Swiggy’s new kind of Surge Pricing Model for food delivery

Till now you might have seen Taxi aggregators like Ola & Uber charging extra under its Surge Pricing Model. But now, Food Delivery start-up Swiggy has also started experimenting with Surge Pricing model in order to retain delivery staffs on peak hours.

Swiggy has started off with this new kind of surge pricing system, wherein the customer would be charged a flat Rs 20 extra when the order is placed on holidays, festivals, rainy days when delivery staffs are fewer than the demand. This extra charge would be used to incentivize the delivery staffs in order to retain them on odd hours.

Swiggy - Food Delivery Start-up Home Page

Currently Surge pricing has been implemented only in Bengaluru and Hyderabad. It is expected to be extended to other cities like Delhi, Gurgaon, Mumbai, Pune, Kolkata and Chennai very soon.

Instead of following a variable surge pricing model being followed by Taxi aggregators like Ola & Uber, here Swiggy is charging a flat Rs 20 fee. In order to cut losses in this food delivery business, earlier in October last year, the company had increased its minimum order value for free delivery to Rs 250 from Rs 150 with a delivery charge of Rs 30. But this time, the extra delivery fee charged to the customer would go to the delivery staff instead of Swiggy, and is not being seen as any kind of revenue enhancer for the company.

Overall, I see this as a good move, since this kind of surge pricing would not be seen in a negative way from customer perspective since unlike taxi aggregator’s surged pricing model, where customers even complained the price getting into multiples of 3 or 4 times, here it’s just a flat Rs 20. Also if this Rs 20 is to be given completely to the delivery staff as an incentive, then it would be really helpful for the company to improve delivery experience for the customer since they would be able to receive their order on time even on an odd day. But whether this so called flat surge pricing model would be effective over the dynamic surge pricing model or not, is pretty unclear as of now.
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