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The real cost of food delivery services

Over the pandemic lockdowns I increasingly started to use takeaway delivery services a couple of times a week.

During the last six months, I discovered it’s often 20-30% cheaper ((before delivery fee) to order direct from stores than use these apps, as stores often load the fee charged by the delivery app service provider into the menu prices on platform.

For example a $20 pizza becomes $24 on an app, then you add a minimum $3 delivery fee and your $20 pizza is $27 delivered.

Sometimes the price difference isn’t obvious as a stores app price might look the same, but the default size is different.

This pricing practice is quite inconsistent and I don’t begrudge small business for recouping the cost to them, but I think there needs to be a lot more price transparency as the true cost of these delivery services is not just the stated delivery fee.

I don’t understand why this doesn’t get more attention from ACCC to ensure these services provide greater price transparency on what is effectively a platform tax vs the itemised delivery fee.

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Hi @BBB, welcome to the community.

This is standard practice for any booking type service…the consumer ultimately pays for the convenience…and most consumers are possibly unaware that convenience comes at a cost to them rather than the business. A business that doesn’t pass on the costs is unlikely to be in business in the long term.

With some booking platforms, e.g. accommodation, a business is penalised through product placement if advertised prices are different to that on the platform. This includes the businesses own website. This results in a uniform pricing structure across all platforms. The commission (or delivery) costs are factored into the online displayed prices.

If one approaches the business separately (ring, email or drop in), one should be able to get a better price than that advertised on the platforms (as you have found out). The business can pass back some/all of the commissions/fees to the customer by giving special prices ex-booking platform commissions/fees.

It would current meet the ACCC requirements. If there was drip pricing…say a price without GST, delivery prices, payment charges etc not disclosed in the advertised price (the additional prices only appear in the payment process), then this would be of interest to the ACCC.

Most business have a range of costs which are loaded onto the final price a customer pays. An example is a TV. It will have fixed costs (wholesale cost, storage, business running costs, GST etc) included in the price. In effect what you are asking is pricing for any costs included in the final price to be transparent to the consumer. This has major consequences for competition if it was entertained by the ACCC, as competitors would know a business weakness and then price to deliberately target these to put competitors out of business.

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I think the argument for this type of price transparency is a bit different for a services business in the examples quoted.

Here we’re talking tangible goods that have different prices because of the sales channel. My issue is not so much there are additions but the lack of transparency especially when you’re already paying a separate delivery fee, that most reasonable people would assume is covering the app service.

You don’t expect to buy a tangible item from a major retailer and find a 20% markup for buying online.

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The same applies to the same product sold through two retailers. prices can be different. With food delivery platforms, a customer is transacting through the platform and not the food outlet. Therefore one can reasonably expect prices to vary, no differently for the same product in two different retailers.

It is comparable to say buying a plane ticket direct with an airline or through a travel agent/booking platform. The same product (same seat on the plane for the same flight on the same day) can vary depending on the point of purchase. What you are asking for is every seller to breakdown their costs so someone can work out why they are different. I am not sure this is in the interests of the consumer in the long term as outlined in my previous post. It has the potential to stifle competition.

This is why, as they say, to stop around. If one doesn’t and agrees/is happy with the price paid, then one accepts the price paid for the goods and services.

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Different competitor pricing is competition. Same store pricing I believe breaches ACCC single pricing.
If a restaurant has public holiday surcharging that must be prominently displayed. I don’t see why purchasing platform surcharges shouldn’t be treated the same way.

Price displays | ACCC

“If you choose an item or service that has multiple different prices displayed or advertised and the business can’t withdraw the product or service from sale and fix the error, you are entitled to buy it for the lowest price.”

When using a booking/ordering platform, you are purchasing through the platform. They are in effect a onseller that takes commissions for the sale. Pricing on this platform can be different to that if one purchases direct with the same company as they have a different selling model. As you have found out, prices can be more (or less) than a direct purchase. If a business could only offer one single price to everyone, then they would fall foul if they give a discount or issue shopper docket type coupons.

Such practices aren’t inconsistent with ACCC pricing requirements.

The pricing requirements don’t apply as when using a platform, you are transacting with the platform. When you deal direct with the retailer in store, you are transacting with the retailer. See flight ticket example in previous post.

Other examples which are very similar to your example is some pizza outlets that have special pickup prices (e.g. cheap Tuesdays) which are different to a pizza price if delivered on the same day (substantially more).

The same applies for goods on Gumtree, eBay etc where the seller sets prices based on costs associated with selling on those platforms. If they advertised a price and then added commissions or other charges to the advertised price, they might fall foul of the ACCC as it would be drip pricing.

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I remember years ago when ordering say 2 pizzas and drink garlic bread jt was just simple before we had mobile phone no hassles. Even when you look online now its confusing to work it out. I reckon it’s to get people into looking but not tell me what it’s going to cost

It seems to be in the definition of goods and services. I view food as a good (which I suspect the average person would), which would be subject to single pricing. Door dash for example in their T&C’s define the stores as Food Service Providers. Through this definition slight of hand it can probably be argued it’s a different service model,hence different price.

My personal conclusion is that my laziness isn’t worth a 20-30% markup to have someone deliver from places within 1km. Especially in lockdown when parking isn’t a problem.

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The prices can even be different across Deliveroo, Doordash and Ubereats. The best price is going direct to store.

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Yes it says that when looking online. I still remember with pizza hut years ago ring up and ordered but it’s different now. It eas never a, hassle but as you say go local store

I am very annoyed about the new “service fee” being imposed by Menulog, the explanation for which is -
“A Service Fee is applied to select orders. This is equal to 10% of the order value before promotions and discounts, with a minimum charge of $1 and a maximum of $4
A Service Fee is applied to select orders to help ensure we can continue to provide the best possible experience to customers and is an investment in continuously improving the service we provide. The fee does not apply to collection orders.”

I wonder how the restaurants to whose order this charge is added feel when they notice that others don’t attract this fee.

Menulog charges for delivery which is right and proper, but I consider that this additional charge is unfair to customers and to restaurants.

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That’s correct. Just found this article which confirms much of the above, and different pricing for different service models is driven by fees and charges.

Hi @lyn.keily, welcome to the community.

Not only does Menulog hit customers with 10% service charges, it charges delivery fees and up to 35% commission on the value of the order on the food outlet. Looks like they are keen to squeeze (bleed) as much money from its customers and ‘partner’ businesses.

The customer ultimately pays for the convenience through higher prices for using ordering/delivery platforms. Convenience appears far more expensive than first realised.

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So very enterprising, and business like. Can I say so very ‘American’ as in the USA and communicate an emotion?

There is a price as a consumer we pay if we order take away and pick it up in person. It may be from the local cafe, or a restaurant.

If one cannot do it in person why not just pay a Cab to pick it up and deliver? It’s likely cheaper to pay the restaurant/cafe over the phone and the cab charge on delivery. If only we had a local Taxi on call.

The ACCC could seek to have services such as Menulog etc show as a separable item the whole of their income, IE as a single line item separately to the costs recovered by the food business. The exception to this might be where the business formally works as a subcontractor to Menulog. IE Consumers are unable to purchase direct from the kitchen.

Note:
Being a little out of the way the options are limited. Any night time bicycle delivery is most likely to end up under the wheels of a truck on the main road. Or in the side drain after skidding off the back of a Python down our road.

Take away requires a designated driver.

The main issue with these services is the pricing model. The service processing cost to restaurants should have some proportionality to order processing cost not the value of the food order.
What’s interesting is competition doesn’t seem to be driving any fairer and more competitive pricing model for restaurants and ultimately consumers. It seems all these services are gouging as much as they can.
I imagine any large scale aussie business won’t risk entering this gig economy platform market due to the regulatory risk of having ‘gigsters’ being declared employees with full entitlements. For an international they probably have a legal entity hierarchy to contain these risks, where they could walk away from Aus market if necessary.

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In this area at least, the only ones which do not attract the fee are those which do the delivery themselves, rather than use menulog. I wish there were more of those, than the other.

Hell no! A cab here would probably cost 3x the cost of the food, and then some. I’d probably prefer to deal direct with the restaurant, but alas, that means that I would have to reveal my CC/DC over the phone, or have cash. I have not used cash since the pandemic began, and I refuse to release my CC/DC number into the wild.

In spite of previous protests, I have used Menulog since it began the 10% surcharge. I try to keep the overall cost under $40 for 2 meals. I guess I just decided to suck it up.

Isn’t that illustrating part of the problem with these services?
If I place a $40 order it adds $4 to the cost.
If I place a $140 order it adds $14 to the cost.

There is likely a larger box required for the larger value order.
Is the actual cost incurred by Menulog of providing the platform and communications for the service exactly the same for both examples?
Is the actual cost incurred by the delivery service provider exactly the same for both examples?

My view is the cost to order through Menulog etc should be a flat fee per order with the delivery charge assessed on the delivery distance.

In respect of what happens at present with the delivery portion of the service. That’s the portion that is screwing the poor deliver provider. How cost efficient are those low value orders.

For those of us who do not live within a five minute bicycle delivery of the food provider it is a car and driver per delivery. Across a few suburbs it’s likely 20 minutes or more round travel time. Some drivers may be able to collect 3 or more deliveries at a time and minimise their costs. This might also explain why some delivery times stretch the customers expectations.

Having an online order and delivery service is great for those who have ready access. I’m not convinced that the business models in use serve the best interests of the consumer or food supplier. The one exception may be the Pizza franchises which still use their own vehicles and staff for deliveries.

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It is not a defence of the proliferating and seemingly demanding delivery services but a counterpoint is that smaller business cannot always afford to have their own delivery people (insufficient or irregular turnover) regardless of how they are compensated. Using menulog or any of the others lets them add an otherwise difficult or impossible service that enables them to better compete regardless of the economics, assuming they can make the economics work for themselves. Some well known and busy locals use menulog for taking orders and have their own deliverers so they must see being on the platform worthwhile or a competitive necessity.

Another variation - a restaurant pays a platform $2 pp per booking that shows. The owner considers it good value since it puts him on the platform and most of his customers are like myself, long standing regulars who ring in anyway, or book on weekends or at our convenience when he is closed. No delivery involved.

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Given that these food delivery services not only charge for the convenience they also take up to 30%+ of the cost as well, the obvious answer is to order direct from the restaurant. The restaurant gets the full amount and you don’t pay jacked-up prices. Win-win I’d say.

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My daughter works at a cafe offering delivery through one or more of the platforms. Apparently, the customer orders, the cafe, restaurant etc fills the order then places an advice that the order is ready for collection. If nobody accepts the delivery, the customer cancels and the venue wears the cost. How unfair. I refuse to use ride share for personal transport or food service. The platforms seem to be running roughshod over everyone.

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