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.