The pandemic age has imposed social distancing and lockdown on people across the world. Every industry, big or small, struggles to survive amid shutdowns and resource limitations. Some sectors are facing a massive drop in demand. For example, restaurants have witnessed a huge decrease in the number of customers. Even takeaway restaurants have also hit hard as people tend to stay at home most of the time.
However, the on-demand services are thriving as people tend to give orders online and get the delivery at their doorsteps. These days we have many on-demand delivery apps are available in the sectors like grocery, food delivery, courier, and the like. Such apps have completely changed the way we buy groceries or food items. On one hand, they have increased convenience in our life, and on the other hand, we can have less risk of getting an infection.
Talking about on-demand food delivery apps, we have some of the big names like Postmates, UberEats, and Doordash that have set new milestones in popularity. These delivery apps have a partnership with restaurants as they act as a third-party delivery app. In this corona age, such apps have come to the rescue of restaurants that are struggling to survive. But, if you think that restaurant owners capitalize on the growing popularity of on-demand food delivery apps, then things are not always what they seem!
Do you know that most third-party food delivery apps charge partner restaurants a commission fee of 15% to 30% per order? Though restaurant owners tend to negotiate a contract when signing up for partnering with a delivery app, they have to pay some amount from their profit as a commission. What’s more, if the restaurant chooses to use multiple delivery services, it has to pay more commission.
Since the pandemic has taken its toll on restaurants, many of them are on the verge of shutdown. In this troubled time, many food delivery apps have reduced commission fees and lent a helping hand for new sign-ups with special discounts. However, it has come out that the reduced fees are mainly aimed at consumers and not at restaurants. Now, on the consumers or the app user’s side, food delivery apps charge a flat rate for delivering food at their doorstep.
This flat rate is defined on various factors including the restaurant’s distance, natural events like heavy rain or floodlike situation, etc. Some apps tend to take on a percentage-based service fee. Simply put, the apps take charge from both customers and restaurants, and whatever additional amount we pay as consumers go directly in the account of delivery apps. Also, one-third of the food items’ price might be charged as a commission for delivery and marketing services. Altogether, a restaurant may make just a few dollars on any items they sent to customers.
It is fair to mention that the onerous fee taken by the on-demand delivery service providers hurt the margins of a struggling restaurant sector. As the world battles against the COVID-19 outbreak, indoor dining has remained completely closed and more people ask for the home delivery of food. In such a scenario, many restaurants have already accepted this on-demand delivery app model while trying to mitigate the impact of high fees on apps by increasing sales.
Some restaurants have also started to request their customers to opt for pickup rather than delivery at home. Some restaurant chains and big restaurants have made their own app and established their delivery network as well. A few restaurants have partnered with local courier services to avoid high commissions and protect margins.
Still, we are not sure of the overall impact of the corona outbreak and its implications in the future. Today, on-demand delivery service providers have set new milestones of revenue, and this trend will remain at least for a short to medium term. Thanks to advancing technology, these service providers keep their on-demand food delivery apps advanced and more user-friendly with every new version.
Considering the facts, UberEats has reported a jump of 103% in year-over-year revenue during the second quarter of 2020. The recent $7.3 B deal of Grubhub to a European firm Just Eat Takeaway also tells the story of success of an on-demand delivery model. These technology-driven apps are capable of outlasting the pandemic across the world as people have already made them a part of their quarantine lives. These apps are here to stay.
Though restaurants try to leverage the benefits of the growing popularity of such apps, there are many challenges they have to face in terms of commission and other charges while meeting the exponential demand for home delivery of food.
In a nutshell, on-demand delivery apps have certainly supported the struggling restaurant sector in this pandemic age, but in return, garnered a lot of money in terms of commissions and flat delivery rate.