Food Delivery – Life saving or predatory?

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Most of us have taken advantage of food delivery apps such as UberEats on those days and nights when we‘re feeling too lazy to go out or craving something across town. Within the last decade, the world has seen a drastic evolution in the food delivery market. Now, it has become an integral part of our lives, especially with the onset of the COVID-19 pandemic.

The rise of online food delivery

Online food delivery services were established not long after the advent of the Internet; however, they only started to get more attention with the increased usage of smart-phones starting in 2010. That was also when soon-to-be successful services like SkipTheDishes and UberEats were launched. The market experienced excessive expansion and collapse in the following ten years, with numerous start-ups being founded, shut down, and acquired. In 2020, three companies, DoorDash, UberEats and SkipTheDishes, constituted more than 80% of the Canadian market share, forming a monopolistic market.

Food services during COVID-19

The food delivery business has bloomed since the pandemic. Restrictions on restaurants across the world, while negatively impacting restaurants that heavily relied on dine-in patrons, significantly boosted the popularity and usage of food delivery services. Google searches for “Online Food Delivery” have surged worldwide since 2020. In Canada, food ordered through online platforms increased by 36% in March 2020 compared to the previous year. With online food orders amounting to $4.7 billion in 2019, the entire market is projected to reach US $85.54 billion by 2024. SkipTheDishes, which holds the most significant market share in Canada, doubled its business in 2020.

The growing “convenience economy” also calls for collaboration from various fields, creating more job opportunities in e-commerce, software development, customer services and finance. Contrary to the belief of inevitable automation and displacement of workers, the growth of the convenience economy has created more job opportunities in areas including fulfilling and delivering orders. With unemployment rates reaching a record high in Ontario in March 2020, and employment in food services dropping 55.8%, we saw an influx of unemployed workers into the delivery business, partly due to its low barrier for entry and partly due to rising demands with a larger population working from home. On the other end, food delivery apps had served as the lifeline for many restaurants since the pandemic, primarily when COVID-19 related restrictions were being implemented, and indoor dining was restricted. It was reported that around 20% more of the revenue from restaurants was generated via delivery in April 2020 compared to April 2019.

Altogether, the delivery apps, restaurants, and workers seeking flexibility in work hours and extra cash have formed a seemingly three-way beneficial co-dependent relationship. Yet, colossal delivery service providers like UberEats have been increasingly criticized as “unethical” on many levels.

Restaurants’ perspective

Despite the drastic growth in revenue for delivery app companies, over 85% of food services and drinking places in Canada experienced a decrease in revenue in 2020, and half suffered a decline in revenue of 40% or more. The loss in revenue was not only due to restricted capacity but also the use of online ordering services. One of the problems at the heart of the conflict between restaurants and delivery apps is the exceedingly high commission fees that the restaurants have to pay for each transaction, which used to be as high as 30%. However, some areas have recently become temporarily limited due to pressure from restaurants and governments. Over 70% of restaurant owners have rated online delivery services as “not or only slightly profitable” and commented that the revenue generated from such services could hardly compete with the conventional dine-in services with all the fees that app companies charge. With the profit margin for full-service restaurants being so low already, some restaurant owners struggle to maintain a sustainable business relying on delivery apps.

(Non-) Workers’ perspectives

Drivers serve arguably the most critical link on the chain between restaurants and customers; yet another controversial topic revolving around delivery apps is the lack of regulation regarding delivery drivers. Platforms such as UberEats have been criticized for treating drivers as individual contractors, not employees, hence not providing them with benefits or even minimum wages. Laws in some states in the US, for ex-ample California, now dictate contractors be treated as employees, yet such matters remain unclarified in Ontario under the Ontario Employment Standard Act. Complaints exposing companies taking cuts from tips for the drivers and giving unacceptably low rewards for long drives are not uncommon. Compression of reward rates by companies during the pandemic has also been reported, despite the workers already previously earning less than minimum wage.

Consumers’ perspectives

Last but not least, items tend to cost more in apps compared to dining in at restaurants. According to a New York Times article, the markup in delivery apps can be as high as 91%. This ridiculously high price results from both marking up the original price and also applying all kinds of service and delivery fees. These apps might be convenient, but the convenience definitely comes at a cost.

At present, take-out and delivery services have become an integral part of life for many of us, and it looks like they are here to stay as part of the “new normal.” Around 50% of the population intend to continue ordering online post-pandemic. The question of whether or not to use delivery apps has become a dilemma for many: on the one hand, we want to support our favourite restaurant while enjoying the convenience brought by delivery apps; on the other hand, we want most of the earnings to go to restaurants and delivery drivers, not to feed the machine. While relevant regulations may be put forward in the future, currently, with limited alternatives at hand, the only things that consumers can do is pay marked-up fees or opt to pick up or eat in whenever possible.

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References:

1.Digital takeout orders predictably soar during pandemic (https://www.restobiz.ca/digital-takeout-orders-predictably-soar-during-pandemic/)

2.Up to 91% More Expensive: How Delivery Apps Eat Up Your Budget (nytimes.com/2020/02/26/technology/personaltech/ubereats-doordash-postmates-grubhub-review.html)

3.Delivery apps:Are they the future of foodservice and will they change it forever? (https://www.restaurantscanada.org/resources/delivery-apps-are-they-the-future-of-foodservice-and-will-they-change-it-forever/)

4.Impact of COVID-19 on food services and drinking places, first quarter of 2021 (https://www150.statcan.gc.ca/n1/pub/45-28-0001/2021001/article/00010-eng.htm)

5.Food delivery orders in Canada increased substantially amid the pandemic (https://www.emarketer.com/content/food-delivery-orders-canada-increased-substantially-amid-pandemic)6.I just need to survive,’ Canadian Uber Eats drivers say wages being squeezed during pandemic (https://www.cp24.com/news/i-just-need-to-survive-canadian-uber-eats-drivers-say-wages-being-squeezed-during-pandemic)7.New Normal: The year in takeout trends as restaurants face a reckoning (https://www.ctvnews.ca/lifestyle/new-normal-the-year-in-takeout-trends-as-restaurants-face-a-reckoning-1.5231981

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