F&B Businesses Don’t Earn Much After Delivery Apps Take Commission, Netizen Breaks Down Costs
UPDATE (17 Apr): Grab has clarified how delivery fees, commission, and merchant revenue work on their platform in a series of infographics.
They have also launched new initiatives such as 0% self pick-up commissions, and islandwide delivery to help merchants connect with more people. Click here for the full breakdown.
Food & beverage establishments are turning to delivery and takeaway methods to survive during the ‘Circuit Breaker’ period, where people are forbidden to dine out and encouraged to stay at home.
Thus, some are turning to food delivery services like GrabFood, Foodpanda and Deliveroo, but not many may have thought about how much the F&B outlet gets when you place an order through a delivery app.
Singaporean F&B business owner Mr Chen did some quik maffs and shared his findings, but because his post was pretty long, another netizen named Mr Chua created an infographic so people can visualise the information better.
And now we’re here to summarise all that. Is this what they call division of labour? Perhaps.
Image for illustration purposes only
Breakdown of a $30 order
In the handy infographic, Mr Chua breaks down what goes into a $30 order we make on a delivery app.
According to Mr Chen, delivery apps normally charge between 30% and 35% per order made through their app.
For a $30 order, this means the app will get $10.50 (assuming it charges 35%) and the food establishment receives $19.50.
Merchant bears cost of discounts
Discounts are part of the game on these apps, and some F&B owners find that they’re “invisible” unless they offer them.
However, whatever earnings they lose as a result of the discount is borne by them.
Factoring in food costs
And because Mr Chen runs an F&B establishment, he’s able to say how much a $30 meal costs for the ones preparing them.
Other costs come into play
There’s also a packaging cost, utilities to pay, staff salaries, rent, and even more. All of these things, estimated to be around $3, are factored into every order.
In other words, when all is said and done, the merchant makes $5.55 from an order costing $30.
Not a lot after costs are deducted, huh?
Service fees must be paid
But wait, there’s more.
When you order $30 of food, there’s a service fee of $14.50 that goes into paying for overhead costs and other stuff like paying delivery drivers.
5% cut in commission thanks to Enterprise Singapore
But with the Government stepping in to help under Enterprise Singapore’s Food Delivery Booster Package, delivery apps will offer an up to 5% reduction in commission — meaning they take 30% instead of 35%, and the food establishment gets $18.90 from a $30 order minus the $3 discount.
This means the merchant can now earn up to $6.90 ($18.90 – $3 – $9) per $30 order, after costs are factored in.
That’s really not a lot of money, even after the 5% reduction of commission, because the remaining commission of 30% is still significant.
So, perhaps a better way to support F&B outlets in this time is to contact them directly through phone, WhatsApp, Instagram or their websites.
Here’s the lengthy original post by Mr Chen, if you prefer a more detailed explanation in prose form:
Convenience comes at a cost
Some of us may baulk at how much we have to pay for deliveries, especially from smaller hawkers.
But all these costs go somewhere, and pay for something. As consumers, we may be used to our food being cheaper, but the reality for many F&B outlets is that they already don’t make much.
So if we want to truly support our hawkers, we may want to help them out more by messaging or calling them to place our orders.
Those who prefer convenience can still use delivery apps, of course. Mr Chen makes it clear that he’s not against their usage, but convenience comes at a cost.
Managing a delivery company has its costs too, so the Government stepping in to help benefits companies and F&B outlets alike.
Featured image by MS News.