Food delivery platforms deny profiting from surge in demand during virus crisis

GRABFOOD, foodpanda and Deliveroo said on Friday that their merchant commission rates are justified because they ensure that delivery riders are fairly paid and the cost of service is covered.

The companies were addressing complaints from the food and beverage (F&B) sector and the public about the high commissions charged to restaurants for each delivery order. Key to the debate was whether the delivery platforms were taking advantage of the surge in demand for food deliveries during the Covid-19 crisis to make more profits.

In a blog post on Friday evening, Grab sought to clear the air by saying that the increase in demand does not directly equate to profits.

"GrabFood is not profitable and we don't 'earn' the full commission we receive. We use a large part of it to pay our delivery partners on top and above the delivery fees they receive," it said.

Part of the 25 to 30 per cent commission GrabFood charges to F&B players is used to top up a delivery rider's base earnings and to provide incentives to them. Delivery riders' base earnings come from the whole sum of the delivery fee that customers pay.

The remaining revenue from commissions is used to cover operating costs such as delivery riders' insurance, cashless payment transactions, product improvements and customer service.

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Deliveroo, in a media statement on Friday night, said that the commission it charges - it declined to say how much - goes towards paying its riders fairly, as well as covering the costs of running a 24/7 delivery platform. Expenses include credit card fees, customer care, tech support and service improvements.

It added that since the circuit breaker kicked in, it has signed on more than 1,000 new riders, and added more than 180 new restaurants to its platform.

foodpanda said in response to a query from The Business Times that its commission rates, which range between 30 and 35 per cent, are offered based on factors such as brand equity, number and location of outlets, cuisine type and average basket size.

The need for delivery platforms to charge high commissions just to cover the cost of its service and the delivery riders, could point to a weakness in their business model.

Grab said that it understands the current food-delivery model is "not perfect", and that the cost to serve each order is high.

"We were working on optimising the business model even before Covid-19 hit Singapore. We believe that technology can create better efficiencies...This will help reduce the overall cost to serve each order so that it's sustainable for all parties on our platform."

Grab also clarified that merchant commissions as well as rider fares and incentives have remained intact, amid accusations circulating on social media that the firm had increased fees and reduced incentives.

foodpanda said it has not changed any pricing on menu items, delivery fees or commission fees during the virus outbreak.