Food Delivery: How Much are you really paying?
It’s probably more than you think
Whether you were already lazy, or the pandemic made you, most people have increased their use of food delivery services. It’s easy, convenient, and after all, it is always great to have whatever food we want to be delivered to our house whilst we watch that season premiere on Netflix.
But, despite how good these services might be, there are multiple hidden costs that we are paying whenever we order food from these platforms. And most importantly, due to the heated competition in this market, companies are taking advantage of customers need for convenience by increasing profitability by hidden costs instead of moving towards innovation.
Research made to understand these hidden costs and how much they are has shown some interesting data. For example, when taking the price of your meal on the app/platform versus the price you would pay directly at the restaurant, cheaper apps tended to be 17% more expensive, and the most premium app up to 40.5% more expensive. So, on average, the convenience fee you are paying for getting your food to your doorstep is about 30% higher than if you went to the restaurant — where you are already paying a convenience fee for not cooking the meal yourself nor washing the dishes.
Food delivery app services will differ by the amount they charge on meal markup, service and delivery fee, and even different taxes — it is interesting to point out that taxes vary up to 1.1%. For example, some apps will barely charge for the service but have a hefty bill for the delivery, and in other apps, it will be the other way around.
And it isn’t only what the app charges, but how it does it. Some restaurants will increase their menu prices for online apps to pay the fee for being in the app (which usually goes up to 30%). But, some apps will list restaurants with whom they don’t have a formal relationship. The problem is that these apps can mark up the prices as high as they want, and whatever the difference from the actual restaurant price will be profit for the app. As expected, this can affect the name of the restaurant.
The main problem is not just that food delivery will be more expensive in some apps than others; The biggest problem here is that apps use only price differentiation instead of user experience and innovation to increase their competitive advantage.
There are plenty of ways apps could innovate to create a much better user experience, for example, multi-location ordering, for when it feels like a hamburger and poke night. New packaging that keeps the food in better condition whilst also being more eco-friendly. More pictures and reviews. Diet and nutrition information would be a great way to serve its customers whilst letting them take care of their health better. Integration with social platforms and many other options.
To conclude, what is important to note is that food delivery is here to stay; there is no debating that. But we as consumers have the power to invest our money in those that are really trying to make a change. In the meantime, don’t disregard going to restaurants or buying local, which has no hidden costs and some might say tastes even better.