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The Five Important Things To Know About Food Delivery Marketplaces

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Woman receiving food delivery during the coronavirus pandemic

By Tim Scott

May 26, 2021

Food delivery is something that has been around for a long time, such as pizza places and Asian cuisine.

However, it’s been in recent years that food delivery services such as Uber Eats have popped up, turning all businesses into a store where food comes directly to your door. This has seen a massive increase due to the pandemic and created habits which are here to stay.

For those looking to get on the food delivery service train, now is a better time than any. Essentially, there are multiple ways to incorporate food delivery services into your business model, such as hiring delivery services and offering them in house.

Of course, there is also the option to sign up with a food delivery marketplace or service, which is also known as a food delivery aggregator.

It is, however, extremely important to do your research before jumping onto the delivery service train. It might seem like an answer to your prayers and a quick fix, but there are very risky implications that can arise when signing up.

Here are the five most important things to know before signing up with a food delivery marketplace:

1 - You'll need to pay them more money in marketing fees to get orders 

Usually, these marketplaces will tell you the reason for paying such high commission fees is due to the number of customers waiting and wanting to order from your restaurant. They sell the idea that once you pay up, the orders will come pouring in.

You’re then expected to pay more money for marketing purposes as they have thousands of businesses trying to get customer attention. Therefore, you’re paying them to get your restaurant at the top of the list.

This is how these delivery marketplaces make money in the short term, through pushing for users to pay for marketing exposure. Much like social media advertising, you’ll set a budget and in return, your business is pushed to the top of the feed. The issue is that they have so many brands on their platforms, from huge companies to small family-owned businesses.

Food delivery, rider with bicycle delivering food

2 - They’ve been aggressively acquiring restaurants for years

Over the past decade, delivery aggregators have been aggressively pushing for more and more restaurants to sign up for their services. They want to dominate the marketplace and have their website sitting pretty on top. To them, you’re just another number on their platform, a revenue generator - your brand doesn’t matter to them, just the revenue you can bring in to help them grow.

3 - You take the hit for their mistakes

A massive issue with these marketplaces is when it comes to dealing with refunds. As there are a lot of intricacies and complexities involved with the operation of these marketplaces, the room for error is large.

The idea behind the business model is to have drivers doing as many deliveries as they can in an hour. It does not account for human error such as the driver getting lost, or the food getting cold due to the number of deliveries being performed.

Therefore, refunds can be common place, often accounting for 2%-3% of the gross merchandise value. As the marketplaces are focused on getting more restaurants on their platform, there hasn’t been any time or thought put into getting the customer experience to where it should be.

Unfortunately, it’s not the marketplaces that get the blame, but your brand that receives the hit.

Young girl is eating take out or delivery food at home

4 - They don't bring you new customers, they bring you your own customers

Food delivery marketplaces have done a good job bringing restaurants onto their platforms, with the end goal of owning customer relationships. For growth, they require customers that order 1-2 times a week, to start ordering more regularly.

The issue this presents for restaurants is that every time a repeat order is made through these services, that’s money that should be going directly to the restaurant. Your customers know you, your brand and they love your food.

A marketplace is not needed for your customers to order your food, they can get it directly via you.

Business analytic with tablet pc and laptop computer

5 - They're using your customer data to scale their business 

On average, marketplaces charge restaurants about 30% for a delivery order and somewhere between 15%-20% for collections. Most of the time these businesses are using your money to build their own food product.

What does this mean? It means they are using your money to create their own kitchens to make food. Everything you’ve worked hard to achieve, the data you’ve acquired, now also belongs to them too.

They have access to your data and your customers. This is how they develop their market insights to launch their own competition.

As you can see, it’s imperative to do your homework when setting up a food delivery service. You must consider the long-term implications from listing your brand on these marketplaces. Always consider your customer relations and calculate how these services impact your profit.

Did you know?

WOWAPPS online ordering offers a commission-free nationwide delivery service?

About WOWAPPS

WOWAPPS is an all-Australian tech company, dedicated to anticipating the ever-evolving needs of restaurants and their diners. We are committed to helping Australian Restaurants reap the rewards of additional revenue and brand advocacy, providing seamless customer experiences that are more delightful and convenient.

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