Food delivery businesses are one of the few industries that are booming during the Covid-19 outbreak.
You would think that being at home for weeks on end more means people would want to cook more, but after your brain has melted from several binge sessions on Netflix, we just want food to be delivered into our mouths.
Food stall owners must be drowning in cash at the moment with all the extra orders, right? Well, what if I told you that many of them are earning a mere fraction of what you pay for your meal?
High Commission Rates
The Restaurant Association of Singapore (RAS) has criticised the “very high” commission fees charged by food delivery platforms, saying it’s not sustainable for many F&B businesses with already low profits.
“Whether it is the circuit breaker period or not, the rates are not sustainable for the businesses given F&B’s razor-thin margins”, they said.
The association said that current commission charges range from 25 to 32 per cent for each order.
Many of us may not think about it when we order our food through such food delivery apps, but these high commission rates are just one of the many expenses that eat into the profits of these businesses.
A Fraction of the Price
Facebook user Desmond Chua illustrated this with some informative graphics, showing how little of our money ends up going to the restaurants and stalls we order from.
Let’s say it’s a typical Tuesday morning for you. Bread and cereals have become as boring as life without KTV sessions, so you decide to order $30 worth of McDonald’s breakfast items, telling yourself it’s for your family of four when it’s really just for you.
If a delivery app charges 30-35% commission for your order, then the merchant ends up earning $19.50.
And because many of us are cheapskates who only order from outlets that have discounts, some merchants feel compelled to sell their meals at lower prices for fear of going “invisible on the app”.
This means that the net sale is now $27 instead of $30, and the merchant earns even less.
$17.55 doesn’t seem too bad right? But when you factor in other expenses like food packaging, utilities, manpower, rent, the merchant ends up earning very little.
Yes, the merchant only earns around $5.55 in the end. But do you know what makes it worse? When you take into account the crazy service charges of some food delivery companies, the total amount you pay can go up to $41.50, for a $30 order.
Which means that out of $41.50, the merchant earns around $5.55.
And even with the financial help of the government, such as the Food Delivery Booster Package, the merchant still only earns $6.9 out of our order of $41.50.
This is why so many people are calling for food delivery companies to lower their commission rates.
Lower Commissions to 12% to 15% Instead
The RAS, for example, said that a range of 12 to 15 per cent “would be more viable” for F&B operators here.
“RAS hopes that the delivery platforms will lower their commission rates during the COVID-19 period and also in the longer run,” a spokesperson told CNA.
Even two Members of Parliament spoke out against the high commission rates.
West Coast GRC MP Foo Mee Har described the commission fees as “an exorbitant one-third of customer receipts”.
Waived Some Fees
Some delivery apps have waived some fees, in response to these financial concerns.
Deliveroo, for instance, said it would waive up to S$360 of onboarding fees, in addition to quickening the onboarding process for new sign-ups.
foodpanda has also shortened its onboarding process and is waiving registration fees and commission fees for the first month for those who sign up between Apr 9 and May 4 and have one or two outlets.
GrabFood is also waiving commission fees for self pick-up orders during the circuit breaker period.
But is this enough?
What You Can Do
As Facebook user Desmond Chua says, we can help these merchants out by ordering directly from them through WhatsApp or their website.
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And if you drive or ride, or are physically nearby, you could pick up your food in person from these outlets instead of having it delivered (with your masks on, of course).
There are also some food delivery companies like WhyQ that deliver hawker food without charging commissions.
Its revenue comes from the delivery fee of S$1.50 and a mark-up on food prices made in agreement with the hawkers.
So, the next time you go on your delivery apps, spare a thought for the stall or restaurant you’re ordering from.
It’s already a tough period for them, let’s not make things worse.
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