Cost ReductionTechnology

Third Party Delivery Apps Continue to Evolve in a Competitive Market

Third party delivery apps continue to battle for market share through varying strategies, including reduced delivery fees and route optimization.

Until 2018, Grubhub controlled over 50% of the online food delivery in the U.S. before DoorDash took the lead. Uber Eats, another top contender is active on six continents and boasts the most widely available food delivery service. Grubhub was acquired by the Dutch company Just Eat in 2020.

Two of these three delivery apps recently announced changes in their service, continuing the aggressive competition that exists between these three food delivery apps. All are vying for a piece of the growing delivery pie. The projected revenue for food delivery apps in 2021 stands at $28 billion. By 2025, that number is expected to reach $42 billion.

DoorDash Changes Fee Structure

DoorDash recently announced a change in their partnership fee structure. This change is designed to give restaurants more choices when considering delivery services and affordability. Caviar, acquired by DoorDash at the end of 2019, will also offer these same options.

DoorDash Basic: Restaurants pay 15% in commission fees. This basic service supports a smaller delivery area and passes on a larger portion of the delivery fees to the customer.

DoorDash Plus: Restaurants pay 25% in commission fees. This subscription program expands the delivery area and reduces the costs for customers. As part of DashPass, the company’s customer loyalty program, restaurants gain increased visibility on the DoorDash app and reduced delivery fees to DashPass customers.

DoorDash Premier: Restaurants pay 30% in commission fees. This service provides the largest delivery area as well as the lowest customer fees. In addition to the benefits of DashPass, Growth Guarantee offers a full refund in commission for any months that restaurants accept fewer than 20 pickup and delivery orders, including those received through Caviar.

DoorDash Storefront: Launched in 2020 in response to the effects of COVID-19, this tech platform helps restaurants create their own online stores.  Customers order directly from the commission-free website for pickup and delivery. Deliveries are fulfilled by Dashers. DoorDash eliminated the set-up fee, monthly software fee, and per-order merchant delivery fee. Restaurants pay a credit card payment processing fee on all orders.

Pickup Commission: DoorDash reduced their pickup commission to 6%. This fee applies to orders that customers place through the DoorDash app but pick up themselves.

As restaurants turned to third-party delivery apps as the pandemic surged, mixed reviews became apparent. Some reported that delivery companies such as DoorDash saved their businesses, while others announced the fees were too high for them to sustain and turned to their own delivery systems, catering, or grocery store-like sales to make it through the shutdown.

DoorDash operates in over 4,000 cities in the U.S. as well as Canada, and Australia.

New Features Announced by Uber

Uber Eats has also experimented with reduced pricing tiers with a light plan—a plan that charges a 5% commission fee and lets restaurants use their own drivers. Now, the technology company recently announced its Pickup and Go feature.

This feature is another move by Uber to combine their Uber Eats delivery platform with their Uber rides business. Pickup and Go enables Uber riders to order and pick up meals and groceries while driving to their destination.

The app also makes recommendations. For instance, when a rider orders a meal from a restaurant, the app will identify a nearby partner, such as Wawa or 7-Eleven, and ask if they’d like to pick up something from that business as well.

The streamlined process allows customers to combine orders from multiple restaurants and stores and checkout only once.

Uber Eats’ popular Eats Pass subscription program offers members 5% off food orders and unlimited free delivery from eligible restaurants for a fee of $9.99 each month. Now, members will also save on rides with a 10% discount on three Uber rides every month.

Uber’s Pickup and Go feature will be available in June in select test cities in the U.S., Canada, Australia, Taiwan, and the U.K.

While sales for these third-party delivery apps have continued to explode following the disruption brought on by COVID-19, these companies are still finding it difficult to turn a profit. Grubhub reported first-quarter 2021 earnings exceeded expectations with $550.6 million in revenue. Profits, however, remain elusive. The company suggested their profitability was hit by short-term issues in driver supply brought on by extreme weather, surging demand, and stimulus payments.

  • Subscribe to our latest insights


Are you capital raise ready?