Innovation

Subscription based models set to shake up 3rd party order platforms


Key points
  • The new generation of 3rd party order platforms are following a subscription-based model such as Deliveroo’s Plus program recently introduced to Australia
  • Because customers can order as many times as they want per month without paying additional delivery fees they’ll be likely to order more food more often
  • Uber Eats is also planning to launch a subscription model and DoorDash which offers one in the US has just arrived in Australia
  • The key to their longterm success will be their ability to keep customers engaged and save money compared to the old payment model but how often they order from you. The more flexibility your platform offers in this regard, the better for business.

THIRD PARTY FOOD ORDER and delivery platforms – that is, order systems not owned by the foodservice business itself but by a third-party provider such as Uber Eats, Menulog and Deliveroo – are now so well established that they’ve become an important sales channel for restaurateurs and foodservice professionals.

For businesses selling pizza, home delivery and takeaway usually makes up such a significant portion of sales that these online order platforms have become essential – despite the fact that they typically charge commissions of up to 30 per cent, which has led to some foodservice operators publicly accusing them of exploitation.  

Now there’s a game-changer on the way for order platforms: a move which major players like Deliveroo say will help small foodservice businesses generate more orders. Instead of charging per delivery, the new generation of 3rd party order platforms are changing to a subscription-based model. A few months ago Deliveroo’s Plus program was introduced to Australia, which charges customers $18.99 per month for unlimited deliveries and includes special meal deals as an added incentive to sign up.

The idea is that because customers can order as many times in a month as they want without having to shell out for additional delivery fees, they’ll be likely to order more. Not only more food from the menu but more snacks, drinks and other items outside of regular meals. As they no longer have to pay the usual $3 to $6 per week on delivery fees, they’re likely to put that money towards buying extra food instead.

Australia’s already-crowded local market for 3rd party order platforms has just gotten more crowded with the arrival this month of American market leader DoorDash which charges only $9.99 per month for no delivery fees on food orders of $15 or more.

A tech leak has also revealed the fact that Uber Eats is planning to launch an Uber Pass free delivery subscription model matching DoorDash’s monthly charge of $9.99, after the code was found hidden in Uber’s Android app and screenshots were displayed on Twitter.  While it hasn’t officially launched yet, the screenshots reveal it’s in the planning stages with the code showing it would offer “free delivery [from] any restaurant, any time”.

While these subscription-based models are still in their early days, they’re likely to evolve at a rapid rate to feature new charge plans which include both food and delivery for a flat fee per month – perhaps across several tiers which maximum number of meals ordered per month.

The big success for subscription models so far has been not in food delivery, but in video-on-demand delivery services like Netflix and Amazon Prime, which have built huge subscriber bases internationally. But while the business is different, the way the model works is exactly the same: it’s all about generating customer loyalty.

In the case of food delivery, the plan is that once the customer signs up they’ll be incentivized to order more food more often so as to get the maximum value from their subscription.

Major US food market research company Technomic argues out that these subscription models “present a clearer value proposition to customers”. But the key to the longterm success of the subscription model will be its ability to actually provide customers with a better deal – they need to feel that’s it worthwhile to stay subscribed.

So far, DoorDash claims its DashPass subscription is saving the average customer more than $20 per month in delivery fees, which means the subscription pays for itself when a customer makes just three food orders per month – any more orders than that and they’re saving on delivery fees when compared to the old model. The sustainability of the model over time will likely depend on keeping customers engaged through more food options, greater flexibility and promotional incentives – whether this will translate to more sales for your business, only time will tell.