What is (still) missing in this PBSNewsHour story on delivery apps?
PBS NewsHour recently aired a story, With food-delivery apps like Uber Eats, who’s actually making money? Reporter Paul Solman investigated whether the delivery apps’ business models have long-term staying power. His interviewees included a sample of stakeholders in the food delivery business: restaurateurs, delivery driver, consumers, delivery app providers and investors.
Here is what interviewees say.
- Restaurateur: “The price that we pay to these services to make this happen, it takes all of our profits. These numbers are anywhere from 22 to 30 percent, dependings on the provider. There’s really minimal left over for us.”
- Delivery driver: “It’s like half of what we used to make (with ride hailing). So, after expenses, like, your hour might be like somewhere between $5 to $10 an hour. And that in a city like San Francisco doesn’t even cover, like, living expenses.”
- Consumer: “Usually, the only reason that we would use Uber Eats is if there’s some sort of discount or promotion.”
- Head of Uber Eats: “We should start by acknowledging that, today, Uber Eats does not make money.”
- Investor Vitaliy Katsenelson : “And I think they are still trying to figure out how to make money at this even today.”
- Investor Randy Komisar: “Finding opportunities to invest large checks in potentially big outcomes has outweighed the ability for us to sort of discern good from bad returns on capital.”
- Ranjan Roy who also appears in the story has summarised well on his blog post Doordash and Pizza Arbitrage “What is it about the food delivery platform business? Restaurants are hurt. The primary labor is treated poorly. And the businesses themselves are terrible.”
What is still missing?
We think that the story did not address one serious casualty of the delivery app business. The delivery apps not only erode margins of the restaurants but they also take away one of the most important assets of a restaurant in today’s connected world: a direct digital relationship with customer. Some restaurateurs don’t even realize this loss till it is too late. This loss hurts in running business profitably in long term. As Third-party vs. In-house Delivery: A Guide to Informed Choice accurately puts it:
these platforms slowly siphon off your customers and then charge you to have access to them.
It costs less to bring customers back provided you have ability to reach them directly. Returning customers spend more too. Attracting new customers with retargeting ads that leverage existing customer relationships increases revenue at lower cost. Restaurateurs must not ignore the value of direct digital customer relationship and they should make sure that they own it!
Colligso enables businesses to grow profitably by providing an easy to use and integrated platform to create and cultivate digital customer relationships. Connect effortlessly with customers using our App-less solutions: SpotIn, TextIn, MailIn or WalletIn. Our solutions respect customer privacy, provide easy opt-in/ opt-out and require minimal support. Colligso does not share or sell your contacts.
Use Colligso and take ownership of your invaluable direct digital customer relationships!