Anthony Park: Food for thought

Writing in the AFR  Mark Calbro makes the argument for greater regulation of food delivery services like Uber Eats and Deliveroo. Below is an expanded version of my letter to the Editor.

“When Uber Eats and Deliveroo first rode into town, the commissions charged were quite cost effective, and it made financial sense for our restaurants to sign up.

Then, in a classic bait-and-switch, these platforms dramatically raised their commissions – in many cases they are now up to 35 per cent + GST … plus the $5 delivery fee.

[Restaurants are]  now operating on the most razor-thin margins of any businesses in the land – typically around 0 to 5 per cent.”

Now, to some extent I agree with Mark. No doubt for a restaurant, being listed on an app is probably as valuable as having a website 5 years ago or being in the Yellow Pages 20 years before that. There isn’t much choice – that’s where the customers are. Having UberEats and Deliveroo take most of your profit margin is surely a sting in the tail. However, Mark goes on to say:

If there were true competition the industry would not be facing unsustainable commissions – the market would decide.”

Here is the thing though; there is viable competition. The competing Menulog app has 35% market share. Menulog and is a viable competitor that charges a 14% commission but lets the restaurant handle the delivery and collect the delivery fee.

Of course, delivery apps, whilst being cast as the villain are good for business: they simplify ordering, allowing the restaurant to focus on making food, expand the customer base and grow the enterprise. If restaurants don’t want to pay the commissions they still have plenty of alternatives. For example, could offer discounts to customers for buying directly. Alternative Apps like EatClub exist to discount empty restaurant tables at short notice. Lastly, could switch to deliveries only and move their stores to low rent areas.

These options are conspicuously absent from Mark Calbro’s opinion piece. I would suggest he is lobbying for regulator protection against delivery apps rather than businesses having to make painful changes in their restaurant business model.

To some extent I agree with Mark Calabro. For a restaurant, being listed on an app is probably as valuable as having a website 5 years ago or being in the Yellow Pages 20 years before that. There isn’t much choice – that’s where the customers are. The delivery apps taking one’s margin are a vicious sting in the tail.

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23 Responses to Anthony Park: Food for thought

  1. No commissions or delivery fees to be paid on my meals. I learned to cook and make everything myself. My last restaurant visit (Rockpool in Melbourne) was the crappiest experience ever. I could cook a better oyster blade steak than the rib eye I was served.

  2. Dragnet

    Fads come and go.
    TV and video shops never killed off cinema.
    There will always be a market for conviviality and white linen tablecloths and candles.

  3. Louis

    Yeah, I don’t follow.

    Where I live, the people most using these delivery apps are people without a car. So it’s reasonable to assume that before the apps they were not buying or not buying from the same food businesses.

  4. George Gell

    This is similar to Dick Smith’s beef about software companies such as Trivago charging 15% to hotels and motels for bookings made using their software. I think the small businesses concerned should learn to communicate. with customers. Tell them what the discount’s are and pass them on to customers who contact them direct.Associations of small businesses should adopt a concerted approach which would reduce discounts to more reasonable levels.

  5. Tom

    Interesting post. Is there any danger the poster could tell us who he, she or it is? I assume it is not being kept a secret deliberately.

  6. teamv

    Being on uber eats may cost the business money but it is a hell of a lot easier than developing and maintaining their own online ordering system/app.

  7. Being on uber eats may cost the business money but it is a hell of a lot easier than developing and maintaining their own online ordering system/app.

    When we lived in Melbourne, and from time to time wanted a pizza, we used an antiquated method to order a home delivery. I was called a phone.

  8. Dr Fred Lenin

    Like bemused I cook a nice meal with ease . Many years ago my then bosses wife gave me WA CWA cookbook ,it told you everything ,even how to boil an egg and make candles ,tried and true recioes from the women who fed their families without great cost . I started by trying a couple of dishes a week ,and now I know hpw to cook and what to buy in season ,even desserts . I reckon every kid should get one of these books , it would damage the take away giants ,but people would eat healthier without trendy damaging diets. There were few fat people when this book was popular and I only remember a handfull of fatties when I was at school mind you that was several years ago ,(like 65 years ) . Just cooked silverside the country way ,having it hot with braised cabbage mash and the carrot and onion I boiled with the beef ,a dish fit for a working person .

  9. Tim Neilson

    Where I live, the people most using these delivery apps are people without a car.

    Friends who’ve got kids in their teens and early twenties say that that generation are massive users of those apps. And I’m not talking about poor people.

  10. And I’m not talking about poor people.

    But they also have no real assets (apart from their expensive iPhone). And when they go for a housing loan, the banks will be scrutinising their spending and saving habits quite closely.

  11. Mother Lode

    And I’m not talking about poor people.

    No one should talk about poor people.

    Or to them.

    Just feign being agreeably distracted by reverie looking past or over them and they will often just go away.

  12. egg_

    Lazy young chicks are their biggest customers IME.
    Too bad, if the delivery drivers are alleged to be spitting in the food.
    Bon appetit!

  13. FelixKruell

    Interestingly, even at those higher commission rates, the UberEats of this world are losing money. Hardly evidence of a lack of competition.

  14. Iampeter

    So if for arguments sake, there was no competition, then you agree that there should be regulation?
    Thanks but no thanks. Anyone who agrees with this is just another confused leftist with no theory of government.

    We need support for capitalism, not half-arsed opposition to statism from people that don’t know what a government should or shouldn’t do and why, who end up helping to advance statism.

    Most of the battle for anyone who is actually a right winger today is with the rest of the utterly hopeless “right wing” putting forward clueless, mealymouthed, I agree, but I don’t, but I have no actual position, nonsense like this.

  15. JC

    Peter:

    You are mentally unwell.

    Here’s a case study for you. What do you do with airports? Do you regulate their obvious monopoly or let them whirl?

    You really are very unwell.

  16. Tom

    What do you do with airports? Do you regulate their obvious monopoly or let them whirl?

    Intervention by government regulators that know and care nothing about the practical consequences of competition or the lack of it achieves nothing but increased costs.

    Airports are natural monopolies and usually have astronomical operating margins of 60-90% which aren’t available to businesses in competitive industries. They’re a licence to print money, as JC knows.

    However, the only way to deal with such monopolies is to remove the planning obstacles to competition. That removes market distortions and excessive price-gouging, which in my estimation, is the best that can be hoped for.

    The new Western Sydney airport, for example, will do little more than remove the worst of Sydney Mascot’s price-gouging, but attempting to do more than that would cause more harm than good, in my opinion, because it would effectively suppress competition by driving up user operating costs.

    Both airports will remain fabulously profitable. Competition between them will simply reduce the price-gouging that would exist if Sydney Mascot faced no competition at all. That is the best result without involving government bureaucrats, who know nothing worthwhile about the successful functioning of markets that doesn’t cause harm.

  17. mh

    Look who Uber Eats put in their commercial – Rebel Wilson.

    That means Uber is targeting fat chicks.

  18. JC

    mh
    #3147004, posted on September 3, 2019 at 7:25 pm

    Look who Uber Eats put in their commercial – Rebel Wilson.

    That means Uber is targeting fat chicks.

    With free frozen pies.

  19. egg_

    That means Uber is targeting fat chicks.

    +1

    Fat, lazy young chicks.
    Quelle surprise!

  20. duncanm

    Anyone: “I think the argument for regulation is bad”

    Iampeter: “So what you’re saying is that if the situation changed, you’d be in favour of regulation!”

    Anyone: “Are you stupid, or something?”

  21. Diogenes

    Lastly, could switch to deliveries only and move their stores to low rent areas.

    And those with expensive , hard/expensive to break leases for ‘front of house’ that now have no/few ‘dine in’ customers because of delivery companies , seem to be paying the delivery company for the rope that will hang them.

    A suburb near us used to have a pile of restaurants in its main shopping strip, even though the restaurants weren’t open when the shops were, it made the main street look ‘full’. Since a few of these have closed, and the shops stand empty, neighbouring businesses are seeing a drop in trade, one shop that stands between 2 former, and now empty, restaurants has seen a 50% drop in trade, and as soon as his lease expires at the end of the year he will shut down as well.

    Regulation may happen, but maybe for how meals are delivered, eg sealed containers that stop drivers ‘tucking in’, in temperature controlled bags

  22. notafan

    My favourite Thai had their own ordering website and charges $3.00 for delivery.

    Always flat out.

  23. Candy

    It’s foolish to trust any food delivery service, from a hygienic basis. Why on earth do you want a stranger handling your food.

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