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The Psychology of free delivery
How is Swiggy and Zomato winning the food ordering game?
In an Instagram reel, a D2C owner recounted a situation where a customer's initial cart value stood at Rs. 125, and with added delivery fees, the total came to Rs. 160. The business offered free shipping for orders exceeding Rs. 1000, which prompted customers to add more items to their cart to qualify for the free shipping deal. This experience showcases the influence that free shipping holds in online shopping.
It’s proven that offering free shipping leads to higher average order values, customer loyalty, and increased conversion rates via setting a minimum order amount. But what nudges individuals to exhibit this behaviour? Let’s try uncovering the psychology of free shipping in the context of food-ordering apps like Swiggy and Zomato.
Delivery fee is perceived as a loss of money:
Have you ever come across the concept of loss aversion? It's a fascinating idea that suggests people experience the sting of losing something more intensely than the joy of gaining something of equal value. In other words, losing ₹100 feels more painful than gaining ₹100. When it comes to free shipping, customers often see shipping costs as a potential loss, making the allure of free shipping hard to resist. They're inclined to add more items to their carts to reach the minimum cart value, all to dodge this perceived loss.
The anchor around the minimum cart value:
Have you ever noticed how the minimum cart value starts to feel like a must-hit target when using an app over time? Think about when you've tossed extra food items into your cart to cross that minimum threshold and get free shipping. This behaviour is known as anchoring bias when people depend too much on the single information they come across while making decisions. In this situation, the free shipping offer acts as an anchor, causing even the most minor shipping fee to appear less appealing by comparison.
Swiggy, Zomato and free delivery
Food ordering apps like Swiggy and Zomato initially offered free delivery on all orders, then introduced a minimum cart value for free delivery, and eventually pivoted to a subscription model requiring membership for free delivery benefits. As consumers, we became attached to the idea of free delivery, and any additional delivery fee was perceived as a loss from our pockets, nudging us towards subscriptions.
Once consumers join a subscription ecosystem, they become loyal to the brand. Indian consumers often compare prices across multiple services before placing an order, but holding a subscription changes this behaviour. Subscribers are more likely to bypass comparison and directly use the app to make their purchases, further solidifying their loyalty to the brand.
"There are two cases when it comes to my ordering experience. Earlier this year, around February, I got Zomato Pro. Before that, I had no memberships and would choose an app based on the best offer. However, I became frustrated with Zomato's customer support and their decision not to ensure food quality. This led me to switch to Swiggy One, which I found to be a better experience overall. Swiggy One's recent partnership with Dineout and Instamart added value to the membership, and free delivery on orders over 149 Rupees made it my go-to choice.
My wife shares the same preference, as she uses no separate food app. I typically order for her, and she chooses the restaurant and items she wants. Initially, my choice was influenced by the price and Zomato Pro, but now I've been using Swiggy One for a long time and find it more valuable.” - Girish.
The single subscription nudge to use other services in the app.
“Usually, I prefer using Swiggy and only switch to Zomato when restaurants aren't serviceable on Swiggy. With my Swiggy One subscription, I enjoy free delivery from most restaurants, and it even covers my grocery deliveries. It's a convenient two-in-one deal. Since I order a lot, I know which nearby restaurants serve good dosa. If they're available, I choose them. If not, I sort by delivery time and pick the fastest option as long as it's under 30 minutes and has a decent rating. Delivery times on Swiggy have become longer lately, so I prioritise speed, especially for breakfast since I know what I want to eat.” - Anitha.
For consumers who do not have a subscription, choosing an app seems like an arbitrary choice.
“When choosing an app, it's often quite random for me. Sometimes I pick Swiggy, and other times I choose Zomato. A few specific restaurants are available only on one platform, like MTR HSR on Swiggy or Ayyangar Bakery on Zomato. But unless I'm craving something particular, my choice is generally random. I had a Zomato membership for a long time but didn't renew it for some reason. Currently, I don't have a membership with either platform.” - Vasanth
Free delivery makes food look cheaper.
The perception of free delivery makes the food look cheaper and pushes people to order more from the app.
“At one point, I frequently ordered random cups of coffee. However, I eventually cut back for two reasons. First, I realised I was spending a few thousand bucks monthly on coffee. I started looking at my expenses over the last six months and tried to tighten my budget. It didn't make sense to continue, especially since the coffee took half an hour to arrive. Plus, we have someone at home available for about 12 hours daily, so they could easily make coffee for me. The quality of the coffee I ordered wasn't even that great, so I cut that part out.
Some of my previous behaviour was influenced by my Swiggy subscription, which eliminated delivery fees. This made everything look "cheaper" on the surface. And up until the second half of last year, the delivery was speedy. Living close to three coffee shops, all within a 10-minute drive, I could have my order in just 15 minutes. But after realising the costs and convenience of making coffee at home, I changed my approach.” - Subash.
The delivery fee is friction.
The subscription model can also work in reverse regarding consumer psychology. For instance, those who become more health-conscious and aim to reduce eating out might decide against renewing their subscriptions. In this case, the friction of paying a delivery fee encourages them to cut back on ordering food from outside, further supporting their health goals.
"I haven't renewed my Swiggy One subscription since it expired recently. One of the main reasons for this is my attempt to reduce my outdoor eating habits. A healthy lifestyle has been a focus for me lately." - Vineeta.
Minimum cart value and marked-up prices
However, it's not all sunshine in the world of free delivery and minimum cart value. Restaurants often raise their prices to cover commissions paid to delivery platforms and to take advantage of the psychology of free delivery. For instance, in Bangalore, it's common to find Darshini's, an affordable quick-service restaurant, at almost every corner, where one can have a fulfilling breakfast for less than Rs.100. However, the same restaurant marks up its online prices on Swiggy and Zomato.
Vinayak Rajanahally wanted to order breakfast from Dakshin Café, a nearby restaurant. He compared the total fares for their order on both Swiggy and Zomato. Swiggy showed Rs. 823, while Zomato showed Rs. 785. About to order from Zomato to save Rs. 38, he decided to visit the restaurant and pick up the order themselves. To their surprise, the total bill at the restaurant was only Rs. 440. If they had ordered online, they would have paid 68% more on Swiggy and 60% more on Zomato than the combined food and delivery charges.
This experience highlights how users often assume that ordering food online will only be 10-20% more expensive than the regular price, an acceptable trade-off for convenience. However, the actual difference can be much more significant.
It’s interesting to observe how a single human behaviour could change the economics and landscape of a business.
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PS: The anecdotes are from our research ‘What's Cooking?', a user research series to understand how urban millennial households consume food. The identity and the names are masked to honour the participants' privacy. The anecdotes are rephrased with GPT for a better reading experience.