DoorDash shakes up costs in search of profit

The largest food delivery app in the United States is shaking up the fees it charges restaurants, in hopes it can push more merchants to pay up to 30% of every order.

DoorDash announced Tuesday that restaurants would be able to choose from three new commission levels – 15, 25 or 30 percent – with varying levels of service, depending on whether they wanted to focus on “profitability or growth.”

The introduction of a 15% fee comes as DoorDash faces pressure in several US cities, including San Francisco, Chicago and Portland, where officials fear the app, which has become essential for restaurants during coronavirus lockdowns , begins to increase its prices. after gaining market share.

But while DoorDash hopes to convince regulators with the lower tier, it comes with several caveats, including a tightly restricted delivery radius, less visibility into the app, and additional fees for customers.

Katy Connors, of the Independent Restaurant Alliance of Oregon, said she believed the 15 percent level was designed “to avoid permanent regulation.”

Meanwhile, as DoorDash searches for profitability, after recording a loss of $ 312 million on $ 970 million in revenue in the last quarter of last year, it hopes more restaurants will opt for the level of. 30%, which has the widest radius of delivery and includes marketing and application visibility.

Christopher Payne, COO of DoorDash, said he expected most traders to choose 30 percent, describing it as the best way to maintain the “status quo.”

He denied that DoorDash introduced the lowest tier option to escape scrutiny by lawmakers, and said, “A comprehensive, one-size-fits-all pricing policy is not what these traders want or need. They want the choice of being able to dial phone numbers up or down. “

He noted, however, that the 15% option could reduce the delivery radius of restaurants to just a few blocks, depending on the travel time of couriers. “It’s a choice between profitability and growth,” he said.

DoorDash declined to reveal its typical commission rate before the change, saying it varied widely between types of traders and locations.

Payne said the changes would not affect the earnings of his couriers, known as Dashers. Larger restaurant companies, with multiple locations, would still be able to negotiate different fees outside of the three tiers, Payne said.

The commission on pickup orders, when a customer picks up the food themselves, has been reduced from 15 percent to 6 percent.

In California there are a bill seeking to force delivery apps to give a full cost breakdown of each transaction. “This will help restaurants know if they want to sign deals with these companies,” said Lorena Gonzalez, California State Assembly member and co-author of the bill, calling DoorDash’s new pricing of “public relations game”.

Payne said DoorDash would resist such efforts. “The concept of exposing the entire deal between DoorDash and the trader, I don’t think that’s a good idea because there is a lot of complexity in the deals,” he said.

“You can imagine that a restaurant that makes thousands of orders [ . . .] may have a different offer than someone doing four or five orders a week. “

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