Enlarge /. Two Uber Eats delivery couriers wait in front of Mc Donald's fast food on May 14, 2020 in Ghent, Belgium. With Belgium taking steps to relax restrictions, the restaurant and café are not only allowed to open and take away fast food for customers. Restaurants and restaurants may not be reopened before June 8th. (Photo by Jonathan Raa / NurPhoto via Getty Images)
When Luke Edwards opened OH Pizza & Brew in 2014, the restaurateur in Columbus, Ohio thought that delivery apps could help his business. His chicken wings and pizza specialties – the most popular and best-known "bypass" with pepperoni, sausage, ham, salami, bacon and additional cheese – needed an audience. And he says working with apps like DoorDash, Grubhub, Postmates and Canada's SkipTheDishes helped him build a loyal following so he could open two more OH Pizza & Brews with a different location along the way.
But by January 2019, Edwards had enough. For one thing, he didn't think the services would help his bottom line. "Although we brought in more money after paying the commission rates, there was a decline in net profit," he says. Drivers were inconsistent, he reports, and sometimes lacked equipment such as insulated grocery bags to keep supplies warm. Edwards also found it harder to contact customer service representatives for the apps, who sometimes reimbursed customers for supplies at the restaurant's expense, which he believed had gone well.
"It quickly became clear to me that (the apps) are good at searching and optimizing," he adds. "You were terrible with the delivery." Today OH Pizza & Brew pays its own contracted drivers for the delivery, which Edwards believes will save him money.
Of course, Edwards swims upstream. The Covid-19 pandemic forced many restaurants to close their dining rooms and accelerate online ordering, take-out, and delivery services. Popular services like Uber Eats, DoorDash, Postmates and Grubhub have added hundreds of venues to their offerings. According to the credit card analysis company Second Measure, total sales of delivery services had almost doubled by the end of April compared to the same period in the previous year.
The apps are appealing for a reason: restaurants can quickly access a workforce of insured and background-checked drivers, a customer base of people who pick up their cell phones when they want a meal, and a range of marketing activities and promotions. Add-ons. Taw Vigsittaboot owns Thai X-ing in Washington, DC, a restaurant known for its intimate, firm service to traditional Thai cuisine. Since the end of March, the restaurant has served take-away dishes via delivery apps. "It's very confusing at times, but we're learning," he says. He credits take-out and a government loan to keep the business going. At the end of April, 29 percent of Americans ordered from an online delivery service, according to Second Measure, compared to 23 percent the previous year.
However, the experience of Edwards and others shows the enormous challenge for these services: maintaining both sides of their customer base. They have to compete with each other to keep the eaters who, according to a pit stroke letter to investors in 2019, are "becoming more promiscuous" – looking for deals and promotions on multiple platforms before deciding on a meal. And they have to compete for restaurants whose lower profit margins for commission fees are between 15 and 30 percent per order. According to reports, some owners put menus and cards in every meal ordered by the app to get shoppers to skip the middleman and order directly at the restaurant next time.
As it is, the delivery companies hardly make any money. Grubhub saw a 12 percent increase in sales to $ 363 million in the first quarter, but posted a loss. CEO Matt Maloney told shareholders earlier this month that the company was about to break even during the pandemic. According to Uber, gross bookings at Eats rose 52 percent in the first quarter, but the division also posted a loss.
Smaller, independent restaurants and chains like OH Pizza & Brew and Thai X-ing could be the key to winning the delivery app race. In recent years, the apps have waged a high-profile lawn war to gain partnerships with major restaurant brands such as Taco Bell (Grubhub), Chipotle (DoorDash) and Starbucks (Uber Eats). Grubhub executives informed shareholders in February that "national corporate brands" had negotiated fees for their orders and less was left for Grubhub.
In contrast, “an independent restaurant appreciates our ability to generate demand,” executives said, and therefore pays more commission. (Independent restaurants may also use the app's less popular delivery service, so part of the delivery fee may also be charged.)
Independent restaurants can also influence the political future of the apps. In recent weeks, policy makers in Los Angeles, New York, San Francisco, and Seattle, as well as in Jersey City, New Jersey, and Washington, DC, have passed emergency laws that limit app commissions. They aim to keep restaurants afloat and employ restaurant staff while the food is down. However, delivery services can respond to the regulations by increasing prices for consumers, which could affect sales. After Jersey City set a 10 percent commission cap earlier this month, Uber raised local order fees by $ 3.
“Regulating the commissions that finance our market – especially in these unprecedented times – would force us to radically change the way we do business, set a far-reaching precedent in a highly competitive market, and ultimately, those we try to help the most: customers, small businesses and deliverers, ”said a Uber spokesman in a statement.
Some services have reduced or eliminated commissions for smaller restaurants during the pandemic. DoorDash reduced commissions for smaller restaurants by 50 percent and waived pick-up orders. Grubhub has deferred commissions of up to $ 100 million. Uber also waived fees for collection orders.
Next month, DoorDash plans to launch a new service called Storefront that allows restaurants to control orders through their own websites but that the company's contract workers can use to deliver them. A spokesman said the service is intended for restaurants that want more direct access to customers.
In a statement, a spokesman for Grubhub said, "The vast majority of our orders are processed without delays or complaints. However, if things don't go as planned, we'd love feedback and work hard to get it right." The spokesman also said that delivery times are due to reasons beyond driver control, such as: B. longer preparation time for restaurants and traffic, sometimes longer.
The fierce competition triggers a wave of consolidation, which could ultimately lower the costs for resource-saving advertising campaigns and the competition for drivers. Dutch company Takeaway.com completed its $ 7.8 billion purchase of Just Eat in the UK in January. Uber Eats sells its Indian business to Zomato; and Germany's Delivery Hero spent $ 4 billion at the end of last year to buy the South Korean service Woowa. Earlier this month, the Wall Street Journal reported that Uber had talks about taking over Grubhub. Together, the companies would control around 45 percent of the US market – even with the incumbent US champion DoorDash.
In a statement, a Grubhub spokesman said: “Consolidation could make sense in our industry, and like any responsible company, we're always looking for value-adding opportunities. Nevertheless, we remain confident in our current strategy and our recent initiatives to support restaurants in this challenging environment. "An Uber spokesman declined to comment.
But the fate of these companies can be traced back to the decisions of people like Edwards, who kept all of his employees on the payroll despite the sharp downtown pandemic business. He even distributed some increases, in part because some employees realized that if they were released and had access to pandemic aid, they would earn more if they were released. He attributes the apps to “bringing out the word for us. But sometimes we had to fight to keep customers in spite of them. "
This story originally appeared on wired.com.