Why Do Restaurant Owners Set Higher Prices on Menus Displayed on Swiggy?

Restaurant owners on online food delivery platforms like Swiggy may set higher prices compared to in-house menus. This practice is driven by a combination of factors, including delivery costs, convenience, market positioning, dynamic pricing, and menu variations. Understanding these reasons can provide valuable insights for both restaurant owners and consumers.

Delivery Costs

Online food delivery involves a variety of additional costs, such as commission fees charged by the platform. Restaurants often raise their prices to cover these expenses without sacrificing their profit margins. This cost can be significant, especially when delivery involves transportation, handling, and the platform's per-order fee.

Convenience Factor

In today's fast-paced lifestyle, many customers prefer the convenience of having food delivered to their doorstep. To tap into this demand, restaurants may adjust their prices to reflect the value of this convenience. A small price increase can be justified by the added convenience factor, making it a reasonable business decision.

Market Positioning

Some restaurants position themselves as premium brands and set higher prices to reflect the perceived quality of their food and service. Customers who seek high-end dining experiences are often willing to pay more for premium brands, which can also attract a loyal customer base.

Dynamic Pricing

Prices on the online menu can fluctuate based on demand, time of day, and special occasions. For example, during peak hours or events, prices may rise due to the higher cost of delivery and the increased demand for food. This dynamic pricing strategy helps restaurants manage their supply and demand more effectively and maintain profitability.

Menu Variations

The online menu may differ from the in-house menu due to differences in preparation and packaging costs. For instance, certain dishes may be priced higher when packaged for delivery because the extra labor, packaging materials, and transportation costs are factored in. This flexibility allows restaurants to offer a wider range of options without bearing the full cost of in-house dining.

The Business Model of Swiggy

The business model of Swiggy is designed to maximize the reach of restaurants without requiring them to directly invest in the necessary infrastructure. For example, consider a restaurant in Bangalore, Jaya Nagar, with a seating capacity of 40 customers. If they can serve an additional 80 orders daily through delivery, that's a significant boost in revenue. Here are the key advantages of partnering with Swiggy:

No Infrastructure Cost: By not investing in real estate, restaurants can reduce their overhead costs. Efficient Resource Utilization: Hiring delivery staff is a good solution but it only works during peak times. Partnering with a platform like Swiggy allows restaurants to focus on what they do best – preparing food – and let the platform handle the rest. Prominent Listing: Swiggy provides a user-friendly interface that attracts more customers, which can lead to higher sales. Profit Sharing: Swiggy shares a portion of the revenue from successful deliveries, providing a win-win scenario for both the platform and the restaurant.

The Logic Behind the High Prices

The objective of platforms like Swiggy is to expand the reach and exposure of more restaurants without demanding significant upfront investments. By listing on such platforms, restaurants can focus on their core competency: delivering delicious food at a reasonable pace. Swiggy essentially positions itself as a marketing and delivery solution. However, it is important for restaurants to be transparent with their customers about the price increases, as some may perceive it as unfair.

Conclusion

While it is understandable that some restaurants may inflate their menu prices on Swiggy, it is ultimately up to the consumer to decide whether the convenience and quality justify the price. In the end, the customer is the ultimate judge. By doing their research and comparing prices online, customers can make informed decisions that align with their preferences and budget.