Why Uber Eats has dropped its commission fee cap to 30%

OPINION: In New Zealand, the economy has been devastated by the necessary restrictions put in place to counter the virus, with the restaurant industry one of the hardest-hit sectors.

It’s been almost seven weeks since restaurants across the country were told to shut their doors.

Their revenue ceased. With restaurants now back open for take away and home delivery, restaurant owners, like so many businesses, are being forced to adapt and, most critically, reassess how they do business, now and into the future.

Covid-19 has placed food delivery platforms like Uber Eats in a unique situation.

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People are relying on us to get the food and essentials they need while staying at home. Restaurants are turning to us to help them keep trading.

Delivery partners are using food delivery to get extra income during these uncertain times. We take these responsibilities very seriously.

When the pandemic first hit, we focused our support on helping restaurants stay open as long as they could, driving demand and providing earnings opportunities across the market.

This was critical in the very early stages of the crisis.

Uber Eats has dropped its commission fees cap 5 per cent to 30 per cent.

AP

Uber Eats has dropped its commission fees cap 5 per cent to 30 per cent.

But now, as restaurants try to recover and reopen in a limited capacity, more sustained measures are needed to provide support for the longer term. 

That’s why we are introducing new options for restaurants that change the way they engage with us, and the fees we charge for our service. 

From May 18, restaurants will be able to use their own staff to deliver Uber Eats orders received via the app. This will enable restaurants to choose delivery fees and coverage areas, and pay less than half the current commission to Uber Eats (8 per cent for independent restaurants until July 31, before moving to the long-term rate of 16 per cent). 

Restaurants will be able to divert staff to deliveries and keep more people in work.

Importantly, restaurants can still use Uber Eats delivery partners during busy times  – and as a last minute fallback – when they can’t meet the demand with their own delivery staff. 

People can also choose to cut out delivery all together and use the pick-up option. In March, we announced a 0 per cent commission fee on all pick-up orders (until July 31 before moving to the long-term rate of 13 per cent).

Here people can order via the app and then walk, cycle or drive to their neighbourhood restaurant themselves and collect their food. 

Along with regular delivery using Uber Eats partners, this means there is now greater choice for restaurants with three different ways they can use the platform to build their business, with three pricing options.

This is in addition to changes we have already made to give restaurants control over the pricing of their online menus.

Uber Eats NZ general manager Jodie Auster says part of its commission fees went into supporting restaurants.

SUPPLIED

Uber Eats NZ general manager Jodie Auster says part of its commission fees went into supporting restaurants.

We understand that commission fees are a key concern for restaurants, and one that has only intensified since the onset of COVID-19. After careful consideration, we are lowering them by five percentage points to introduce a new standard fee ceiling of 30 per cent. 

We are doing this to relieve pressure on the bottom line of our restaurant partners for the long term. 

But we know there are many who will want us to go further. Some businesses are calling on us to reduce commission fees by as much as half. This might sound like an easy solution. However, the issue isn’t as simple as it has sometimes been presented. 

The fees charged by Uber Eats help cover the costs of three things: enabling reliable and consistent earnings opportunities for delivery partners, generating demand for restaurants, and the revenue needed to support our business operations.  

On the delivery partner side, this includes signing up new delivery partners, enabling earnings opportunities, and maintaining high safety standards, including education and insurance costs for delivery partners.

Many people don’t realise that much of the commission fee paid by restaurants is reduced to cover the actual cost of food delivery.

This is because delivery fees paid by consumers at the check-out can be as little as $2.99 (or $0 for promotions) and don’t always cover the restaurant’s cost of paying delivery partners for the work they do.   

Of the remaining commission fee, more than half is reinvested back into the marketplace to generate demand and ensure existing customers keep coming back. 

This is done through advertising and marketing campaigns, the funding of consumer promotions, and teams of specialists who provide support to restaurants, delivery partners and consumers who place orders through the Uber Eats platform.

Last year, our support agents helped resolve over 3 million consumer and partner inquiries across New Zealand and Australia, making sure our marketplace functions in the best possible way.

The remaining portion of the commission fees goes to Uber Eats to cover things like card transaction costs, investment in our technology, and the cost of running our business – our staff, our premises, taxes. And, yes, profit also. But fundamentally, like restaurants themselves, we are a low margin business.

Providing a platform for the delivery of food to millions of homes across New Zealand, at the tap of a button, in an average of under thirty minutes, as well as providing 24/7 customer and operational support, costs money.

But there is another business reality we need to consider: We can only thrive when our restaurant partners do. That was true before COVID-19, and is even more so now. 

Since switching the Uber Eats app back on almost two weeks ago, we have continued to show our support for restaurants by waiving activation fees for new restaurants coming onto the platform, enabling daily payments to improve cash flow, and making up to $5 million in funding available for independent restaurants across

New Zealand and Australia to deploy in app promotions. We are also supporting our community by giving 25,000 free meals to frontline medical staff across the Tasman.

Like so many people, I’m pleased to see signs that our world is righting itself. Parks and beaches are starting to reopen and kids are returning to school. But for many, the real marker of normality will be when restaurants reopen their doors and our cafes begin to buzz again. And when they do, Uber Eats will continue to support restaurants in every stage of the recovery.

Jodie Auster, Regional General Manager Head of Uber Eats


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