How will hiking food delivery fees impact order volumes?
Food delivery companies around the world, be it Uber Eats, Careem Now, Deliveroo, or others, are making losses on almost every order that they deliver. In spite of charging restaurants a percentage of order value, depending upon the revenue type, they are still unable to churn a profit.
The recent highlights of over-valued yet loss-making global companies failing to incite trust from investors, have put an added pressure on loss-making companies to turn profitable soon.
Restaurants, who have long complained about the razor thin margins and regular offers and discounts that hinder profits, have also been adding pressure on these platforms. Jamie Oliver blamed food delivery for the closure of his restaurants.
Zomato was recently in the line of fire by the National Restaurant Association of India (NRAI) who launched a #Logout campaign against the platform.
In the food delivery industry, Uber Eats has already increased delivery prices through a range of dynamic and fixed fees, so has Deliveroo in the US.
A recent “bug” also showed the popular AED 18 value meals on Deliveroo’s platform to charge AED 7 as a small order fee in addition to AED 5 as delivery fee in the UAE, which they said they will be fixing “manually”.
Zomato, on the other hand, removed the option to see restaurants’ telephone numbers on the mobile app, which hinder consumers from calling the restaurant directly to place orders; encouraging them to use the platform’s delivery service.
These new fees and changes are currently unpopular with customers who have become accustomed to cheap order values, discounts and delivery charges. However, fewer people know that the loss making delivery companies could only offer lower prices on the dime of investors.
Now that investors are tightening their grip on investments, and pressuring profits, delivery companies are bound to increase their charges.
So how will this impact the market?
In the short term, people are likely to get angry and even order fewer times. The lower order volumes will likely see a correction in the market, with a small possibility of players dropping out as well as the sector becoming more economically sustainable.
However, in the long run, the market is likely to come back on track given the changes in consumer eating habits and behaviour.
Furthermore, the current delivery platforms are only accessible to 11 percent of the world’s population. The increase in operations and expansion could increase the market, getting order volumes back on track, if not more.
The food industry has long since worked on changing consumer eating habits. They do not want people to cook at home, instead they want to deliver pre-packaged or pre-prepared food. There are homes in leading cities of the world today where there is no kitchen.
However, there are multiple health benefits to cooking and eating home-prepared food; from the quality of ingredients to control over the amount of carbs, fat and sugar that go into the food. This correction in the market caused by increased delivery fees could see the rise of healthier options beyond home-cooking; such as meal plans, grocery delivery platforms and more.