The Pros and Cons of Partnering with Delivery Apps

 

Delivery apps have become a significant part of how businesses, particularly restaurants and local retailers, reach their customers. These platforms offer convenience to both consumers and merchants, handling logistics like delivery and payment processing. With services such as Uber Eats, DoorDash, and Grubhub, many businesses can tap into a wider customer base without needing their own delivery infrastructure. Partnering with these apps isn't without its challenges.

While delivery apps can help boost sales and offer logistical support, they often come with high fees and potential risks to brand reputation. For small and mid-sized businesses, this trade-off between convenience and cost requires careful consideration. Understanding the pros and cons of working with delivery platforms is essential for making informed decisions that align with business goals.

Advantages of Partnering with Delivery Apps

The appeal of delivery apps lies in their ability to extend a business's reach almost instantly. Whether you're a new restaurant or an established brand looking to expand your customer base, these platforms offer several key benefits:

• Increased Exposure: Delivery apps provide visibility to thousands of potential customers who might not otherwise know about your business. Being listed on popular platforms can help attract new clientele that may not have found you through traditional marketing channels.
• Convenience: Businesses no longer need to manage the logistical complexities of delivery themselves. The apps handle everything from order placement to last-mile delivery, allowing businesses to focus on what they do best, preparing food or fulfilling orders.
• Access to Data: Many delivery platforms offer businesses insights into customer behavior, such as peak ordering times and popular menu items. This data can be used to refine offerings and marketing strategies.
• Cashless Transactions: These apps streamline payments, reducing the need for cash transactions and manual processing. This speeds up the checkout process for customers while minimizing human error on the business side.

Downsides of Using Delivery Apps

Despite the clear benefits, there are several drawbacks that business owners must consider when partnering with these platforms:

• High Commission Fees: One of the biggest concerns is the substantial commission fees that apps charge per order, often ranging from 15% to 30%. For small businesses operating on thin margins, these fees can significantly cut into profits.
• Loss of Control Over Customer Experience: When you rely on third-party drivers for delivery, there's a loss of control over how your product is presented once it leaves your premises. If an order arrives late or in poor condition, customers may hold your business accountable even though the delivery process is out of your hands.
• Brand Dilution: Being listed alongside many other competitors on the same platform can make it difficult to maintain brand identity. Customers might prioritize convenience over loyalty when browsing multiple options in one app.
• Lack of Direct Customer Relationship: Delivery platforms typically own the customer data, meaning businesses miss out on opportunities to build direct relationships through email lists or loyalty programs. This makes repeat customer engagement more challenging.

How Fees Impact Profitability

The fee structure imposed by delivery platforms is one of the most critical factors when deciding whether to partner with them. According to some reports, restaurants pay an average of 20% in commission fees per order made through a third-party app. While this percentage may seem manageable initially, it adds up quickly, especially for small businesses operating on low margins.

The impact of these fees becomes even more pronounced during peak times when orders increase but so do platform surcharges. In some cases, restaurants have been forced to raise menu prices on delivery apps just to offset costs, potentially alienating price-sensitive customers.

The Balance Between Reach and Cost

Balancing increased exposure against potential profit loss is a constant challenge for businesses that use delivery apps. Some restaurants choose hybrid approaches where they maintain their own in-house delivery service alongside partnering with third-party platforms. Others prefer limiting their reliance on these apps by offering exclusive discounts or loyalty programs directly through their websites or physical locations to encourage in-person dining or takeout orders. This approach allows businesses more control over their brand experience while still leveraging the wide reach provided by external platforms when necessary.

Partnering with delivery apps offers both opportunities and challenges for businesses. While the increased exposure and convenience are undeniable benefits, high fees and loss of control over customer interactions pose significant downsides. The decision to collaborate with these platforms should be based on each business's specific needs and financial situation. Whether it's worth it depends largely on how well the potential benefits outweigh the costs involved.

Reference List

1. Business Insider - businessinsider.com Provides articles and reports about the costs associated with delivery platforms and their effects on small businesses.

2. Statista - statista.com Offers detailed statistics on delivery app usage, growth trends, and consumer behavior.

3. Restaurant Business Online - restaurantbusinessonline.com Publishes insights into how restaurants are adjusting to delivery app partnerships and managing the associated costs.

4. The Verge - theverge.com Features technology-focused analysis on how delivery apps affect local businesses and their profitability.

5. The New York Times - nytimes.com Investigates the impact of delivery services on small restaurants, including fees and customer service challenges.

6. The National Restaurant Association - restaurant.org Provides guidelines for restaurants considering third-party delivery services and discusses best practices for maximizing profits.

7. Eater - eater.com Delivers restaurant industry news and consumer insights, focusing on how digital ordering apps shape modern dining habits.

8. TechCrunch - techcrunch.com Covers technology-driven business models, including analyses of the logistics behind popular delivery apps.

9. NPD Group - npd.com A market research firm offering data on foodservice trends, including consumer preferences for food delivery services.

10. Pew Research Center - pewresearch.org Provides demographic insights into how different population segments use online food delivery services.

11. Morgan Stanley Research - morganstanley.com Offers financial analysis and reports on the economic impact of gig economy companies, including food delivery apps.

12. The Guardian - theguardian.com Features investigative journalism on how restaurant workers and delivery drivers are affected by app-based gig work.

13. The Financial Times - ft.com Reports on the financial health of major food delivery platforms and their strategies to stay competitive in a crowded market.

14. CNN Business - cnn.com/business Delivers analysis on the operational models of delivery services and their effect on the retail and restaurant industries.

15. The Atlantic - theatlantic.com Discusses cultural shifts in how consumers interact with local businesses through third-party apps.

16. Deloitte Insights - deloitte.com/insights/us/en.html Offers consulting reports examining the broader impact of digitization on industries like foodservice, including delivery trends.

17. CNBC - cnbc.com Provides up-to-date financial news about major players in the gig economy, with a focus on the profitability of food delivery companies.

18. The Wall Street Journal - wsj.com Features in-depth business reports covering revenue models of major third-party food delivery platforms.

19. Zagat Survey (owned by Google) - zagat.com Offers crowd-sourced reviews and data relevant to restaurants using third-party platforms to reach customers more effectively.

20. The Counter (formerly The New Food Economy)- thecounter.org Explores the economics behind modern food systems, analyzing how independent restaurants are impacted by technology and online ordering apps.