It is fast and efficient so lots of people that are busy with the hustle and bustle of the day gladly take advantage of these apps for they do not have to leave their seat to grab their food. With just a few clicks, they can get right back to work or whatever they are doing until their food rings up. As convenient as they are though, it does more harm than help restaurants once we evaluate the market.
To earn profit for these exchanges, delivery apps such as UberEats follow a market model where they charge both the restaurant and the customer. For their services, the restaurant owners are charged 30% of their listed prices and no option to increase their prices to "cover" the costs of delivery. This percentage is harmful for it accounts for all the, "cost of labor, and the remainder for 'everything else' - rent, utilities, insurance, supplies, credit-card fees, and profit". The fact that average profit margins for a restaurant is usually under 30% which goes to show that restaurants lose money at every exchange they have with a food delivery app.
In a society where getting food delivered is frequent, it is a problem since most restaurants are not willing to, "hire a full-time delivery person without ruining their profit margins....[and are] very hesitant to add additional unknown factors to their service". This results in them relying on food delivery apps to deliver the food when needed and only paying them for their one time service which seems to save a lot of money for the restaurant and attract more/different types of customers to their market however, this does not seem to be the case.
Year by year, the delivery transactions in U.S. restaurant sales has gone up as they are becoming more dominant and popular, "analysts at Morgan Stanley predicted that that number could eventually reach forty percent of all restaurant sales, and an even higher percentage in urban areas and among causal restaurants, where delivery is concentrated".
In a few years, the whole dining industry might change drastically with how food delivery is getting popular with how easy and convenient they are.
Source: Why Uber Eats Will Eat You Into Bankruptcy
It's interesting to consider how the advent of technology has facilitated this increase in delivery transactions, considering how important the app aspect of delivery services is. Ordering food through an app is very convenient for consumers, and clearly many people don't care about an additional cost that is usually added for the delivery service. This reminds me of the current success of transportation services in app form like Uber and Lyft, which may be replacing services like taxis the way delivery apps are influencing restaurant delivery and the delivery market overall.
ReplyDeleteIt's true that delivery app is getting quite popular today. Its convenient service is an attraction for the majority. However, I believe that our customers pay too much for the delivery fee. For instance, if I order food online at Chipotle, I need to pay 5 dollars for the delivery fee plus tips for a meal of 8 dollars. Though I understand the necessity to pay delivery person a good amount of fee, I think we are under the model of consumer surplus, where customers have to pay for extra supplies. I wish there is a better solution in future to provide consumers cheaper and convenient services.
ReplyDeleteThis is very interesting that it actually is not profitable for most restaurant. This past summer my brother worked for door dash and was able to make $30 an hour at some point. This was very good considering he could make his own hours. However I see this as an inefficient system. It increases the amount of total driving time which would be lessened people just went and got the food themselves. This is increasing carbon emissions and encouraging people to stay in their homes.
ReplyDeleteI found it interesting to learn that the restaurants do not drastically benefit from food delivery. This does expose them to new customers and makes it accessible for the customers, but it seems that DoorDash is mainly a negative impact for restaurants, since many restaurants need to use these services if they want to compete with other restaurants. From the perspective of a customer, these services are great because we don't want to have to get up to get food. However, Evelyn makes a point where considering other aspects like environmental aspects, food delivery is regressing progress for these areas.
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