There has been a lot of news lately around third-party on-demand delivery. They are convenient, but that convenience comes with a cost to both the consumer and the restaurant.
Let’s take a look at the consumer cost. A NY Times article recently reported restaurants using third-party delivery increased prices through these aggregators anywhere from 7% to 91% per item. SWIPEBY undercover shoppers* used the UBEREATS app to price a sandwich at a South Florida suburban Firehouse Subs versus on the same location in-store menu.
Our shoppers priced the Honey Ham Large online through UBEREATS for $14.15. The in-store price for this same item was $10.55. This is a roughly 25% increase in the price of the sandwich online without taking into account delivery costs, fees, and tip. With these additional costs, a Large Honey Ham sandwich delivered would have come to $18.13.
The cost difference between in-store pickup and third-party delivery with a reasonable $3 tip was $10.58. Basically we paid double the price for a single sandwich. If we had chosen curbside pickup or takeout, we could have purchased two sandwiches and both of our shoppers could have had lunch.
Now let’s consider the restaurant cost. James Hilston at the Post Gazette recently published a graphic showing the breakdown of food costs to order. This includes the cost of goods sold, labor, and fixed costs versus the cost of delivery fees. If the restaurant didn’t attempt to recoup these extraneous costs, they would actually be paying customers to order food from them. Pretty tough to stay in business when you are allocating resources at a loss.
Many of these third-party delivery aggregator apps also offer takeout. Again, the unknowns are the extraneous costs to both the consumer and the restaurant. Sound redundant? Well it is. In order to profit, third-party delivery companies charge a 15% fee to the restaurant for takeout. In order to cover that fee the restaurant has three options.
- Eat the cost of 15% into the order margin.
- Pass a partial cost over to the consumer.
- Pass the cost of the 15% or even higher (the full cost as if delivery + 30%) to the consumer.
Now that all costs are evident, going to the physical location may feel like a bargain.
While this pricing model may be the standard within larger third-party aggregator apps, the market is ripe for a company to help solve this problem. That’s why SWIPEBY, a marketplace aggregator and curbside pickup solution that allows the average restaurant to be a virtual drive-thru, decided to help their customers by offering delivery. With no hidden fees and a simple pricing model, SWIPEBY works to benefit both the consumers and the restaurants. Convenience is king with the SWIPEBY model and cost is not a factor for either party.
Restaurants and business owners have a number of commerce options. The future is clear that online ordering and pre-ordering is here to stay, whether someone is at the movies, on-the-go, or sitting on the couch. Consumers have fallen into a world of convenience that isn’t going anywhere. If anything, it is only going to get better and more appealing. So whether you are looking at it from the consumer perspective or the restaurant/business perspective, there are options out there and it is important to stay relevant in a convenient and constantly evolving environment.
*Shhh, a couple of us do research on the sly.