As COVID-19 reaches the F&B sector, orders for delivery applications arise to reduce commissions

SINGAPORE: “Very high” commission rates charged by food delivery platforms are affecting the already meager profits of food and beverage (F&B) companies, said an industry group that called for these rates to be lowered during the COVID-19 pandemic and eventually.

The Singapore Restaurant Association (RAS), which has more than 450 members, said the commission’s current charges range from 25 to 32 percent for each order.

“RAS expects delivery platforms to reduce their commission rates during the COVID-19 period and also in the long term,” a spokesperson told CNA.

“Whether it is the circuit interruption period or not, the rates are not sustainable for companies given F & B’s slim margins.”

In recent years, consumers’ willingness to pay for convenience has sparked a growing appetite for food deliveries in Singapore, spurring the growth of platforms like foodpanda and Deliveroo.

While there were concerns about the high commission rates, which can go as high as 40 percent of an order according to the F&B owners CNA spoke to, they were largely overshadowed by the appeal of capturing a portion of a growing market.

But as F&B owners grapple with a sharp drop in revenue amid the COVID-19 outbreak, especially with stricter rules banning meals until at least May 4, these rates have become more difficult to enforce. support and have increased requests for lower rates.

At least two members of Parliament (MP) have spoken on this recently.

West Coast GRC MP Foo Mee Har described the commissions as “an outrageous third of customer receipts” and, citing the F&B owners he spoke to, only “barely tolerable in peacetime.”

As businesses become increasingly dependent on food delivery services amid the virus outbreak, “paying such fees makes the sustainability of food establishments unsustainable.”

Speaking on April 7 during the Budget debate, Ms. Foo urged delivery platforms to do their part by reviewing commission models to “encourage a more equitable distribution of costs and benefits.”

READ: Events postponed, restaurants “almost empty”: the F&B industry is waiting while COVID-19 measures the bite

Also urging food delivery platforms to reduce their commissions “especially during these unprecedented times,” Melj Yong, deputy for the GRC Tanjong Pagar, said the current charges are “too outrageous” for street vendors.

“In some cases, commissions exceed the street vendor’s profit margins!” He commented in a blog post from the labor movement on April 4, adding that a lower rate would push more street vendors to sign up.

DELIVERY APPLICATIONS WAIVE SOME FEES

When asked if they would lower their commission rates, the top three food delivery players in Singapore – foodpanda, Deliveroo, and GrabFood – would only say they have multiple measures to help F&B companies cope with the consequences of COVID- 19.

For example, they have accelerated the process of incorporating new subscriptions amid increased demand. Deliveroo said he has boarded around 100 new restaurants since April 3 and aims to double this number in the next two weeks.

Some related fees have also been removed, based on responses from these delivery players.

foodpanda said its onboarding process has been shortened to 3 days and that new suppliers won’t have to pay registration fees. It is also exempting commissions for the first month for those who register between April 9 and May 4 and have one or two points of sale.

Deliveroo will waive up to S $ 360 of incorporation fees, its spokesperson said. Meanwhile, a new weekly payment service begins later this month so that liquidity-strapped restaurants can have faster access to their delivery revenue.

GrabFood is exempting commissions fees for auto pickup orders during the circuit breaker period and its other measures include creating a “Local Heroes” icon on its home page to help increase the visibility of F&B locations. single output.

COMMISSION RATES LOWER TO 12-15%: RAS

Such measures do little to alleviate the problems of F&B traders, said restaurateur Loh Lik Peng, who described them as “tactical promotions” to capture market share.

“Is this a fundamental change in the commission model? I would say no, as it makes no difference in the long term, “he said, noting that rates of around 30 percent” continue to be unsustainable “as they wipe out a large chunk of F&B’s business profits.

And amid the COVID-19 outbreak with a large majority of F&B businesses already suffering “fairly steep losses,” many F&B operators stick with deliveries simply to “mitigate” more losses, he added.

Mr. Loh noted how concerns have been raised about the high commission fees charged by food delivery players in other countries. For example, last month the New York City Council introduced legislation to limit such rates to 10 percent.

READ: Delivery rates, reduced commissions when Americans stop dining

“We hope that more can be done in the long term,” said Loh, who is one of the founders of an informal F&B group called #savefnbsg.

The group, made up of more than 500 restaurants here, issued a statement on Wednesday (April 15) asking the government to consider the obligation to pay these commissions.

Citing how San Francisco city officials have issued an emergency order for delivery platforms to limit commissions to 15 percent, an open letter on the group’s website said: “If the Singapore government can do so, Himself and ordering delivery platforms to reduce their commission by at least 15 percent will play a huge role in our survival. ”

He has set up an online petition to mobilize for lower commissions, after watching “with frustration” as these rates “steadily increased from 20% to 30%.”

The heavily worded statement also called on consumers to directly order F&B operators.

“As restaurateurs, our appeal to you is: If you want your dollar to have the biggest impact on supporting the industry, please stop ordering through these platforms.”

The RAS said a range of 12 to 15 percent “would be more viable” for F&B traders here, in response to CNA’s question about the amount of fees that should be reduced.

For now, it’s encouraging that restaurants take advantage of a recently announced aid package from Enterprise Singapore that will finance 5 percentage points of the fees charged by Deliveroo, GrabFood and foodpanda, with no limit on the value of the food delivery transaction, starting at from April 7 to May 4.

READ: F&B Businesses to Receive Food Delivery Order Support with New Enterprise Singapore Booster Package

FINDING ALTERNATIVES

As the COVID-19 outbreak spreads, companies are considering alternatives.

Unlisted Collection, for example, has turned to local startup Oddle to create an online ordering system for its restaurants so that it can receive orders directly through its websites. Oddle receives a cut of 10% of each order that is made in this system.

Loh said his firm “will continue to see Oddle as a preferred platform” given the lower costs.

Having a custom ordering site also allows you to better attract customers, rather than having to fight for attention with many other restaurants listed in the same market, the businessman added.

Loh does not appear to be alone, as Oddle has seen 15% more signups since the end of March, his chief financial officer, Solomon Tan, told CNA.

“In the past, merchants will tell us, ‘I’m already in the food delivery markets, so that’s my online presence.’ This changed after COVID-19.”

Oddle hopes to “empower” F&B operators with his own digital presence. In addition to consolidating orders and payments, its system also provides analytics to help companies determine the type of marketing required. Oddle can also provide logistical assistance for meal deliveries.

“We want to help companies connect online. This is something that I think has become much more important during COVID-19 when companies realize that they cannot address the needs of the market.

“Simply put, they are forced to speak to a reseller to sell more, when they may just be trying to sell more,” Tan said.

Other F&B owners have resorted to making their own deliveries by touching conductors or ad-hoc conductors.

One of them is DOCO, a restaurant that sells Japanese rice bowls in Tanjong Pagar. Owner Ken Tan visited Facebook last week to search for drivers looking for additional income. Since then, it has brought together five drivers who make an average of 20 to 25 deliveries per day.

Drivers can maintain delivery rates, which range from S $ 3 to S $ 10, depending on the distance.

“I would like to place more orders across the island … and these drivers also need to earn an income. So I thought why don’t we go try this.”

EARTH EFFORT FOR HAWKERS

For street vendors, many of whom have been deterred by commission fees from food delivery platforms, an initiative that started on Facebook earlier this month is considered timely help.

Called Hawkers United – Dabao 2020, the Facebook group allows street vendors to promote their menus, takeaways, and delivery services for free.

Its creator, Mr. Melvin Chew, who runs Jin Ji Teochew Braised Duck & Kway Chap at the Chinatown Complex, said that most street vendors do not have accounts on social media platforms and are used to depending on customers without appointments. previous.

Knowing that many will be seriously affected by the dinner ban and other “circuit breaker” rules, he knew he had to act quickly to help.

“That is why I created a space where it is free for all street vendors and some food and beverage outlets, and I also welcome consumers interested in ordering from these stalls.”

The group has attracted nearly 220,000 members as of April 15, a surprise to Chew.

While there has been “unwelcome” attention, such as the creation of a fake Telegram group, Chew said he and his team were encouraged when they learned that some street vendors have received “overwhelming” orders through the Facebook group. .

The second-generation street vendor hopes to help more and has established two other groups on the social media platform. One is aimed at providers in the wet market – Pasar United – Dabao 2020 – and the other called Delivery United aims to help F&B operators locate the delivery people.

Most street vendors told CNA that they still hesitate to subscribe to food delivery platforms as commissions are still “too high” even with a month-long financing from Enterprise Singapore.

Delivery platforms will have to reduce their rates “by a wide margin” or offer the street vendor community “a commission rate commensurate with sales,” Chew said.

“If my duck rice costs S $ 3 per package and mega ordering platforms with delivery services deduct 30 percent, you can quickly calculate how little we recovered. I still have to pay the rent, utilities, suppliers, packaging, etc. “

READ: From the Street Vendor Center to Your Home: Is Cheap Local Food Delivery a Recipe for Business Success?

To be sure, there are new companies that have been trying to disrupt the space by delivering food from street vendors.

WhyQ, which started operating in early 2017, does not charge commissions “considering the low cost of the street vendor fee,” said its co-founder Rishabh Singhvi.

Their income comes from the delivery fee of S $ 1.50 and a surcharge on food prices made according to the street vendors.

However, Chew said having reliable island-wide delivery is also important to street vendors when it comes to deciding on delivery partners.

“Because street vendors work primarily for and by themselves, we must minimize risks and problems, including delivery, and avoid customer complaints,” he said.

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