Delivery apps charge customers a fee for the convenience of having food, groceries, or other items delivered to their location. The fee may vary based on distance, order total, or other factors.
– Direct revenue from each delivery – Encourages customers to use the app for convenience – Potential for surge pricing during peak hours or high demand
– Competitive pressure to keep fees reasonable – Potential customer resistance to paying delivery fees – May deter price-sensitive customers
Uber Eats, DoorDash, Grubhub
Commission Fees
Delivery apps earn a commission from partnering restaurants or stores for each order placed through the platform. The commission is typically a percentage of the order total.
– Revenue generated from a wide network of restaurants or stores – Encourages businesses to join the platform to expand their customer base – Scalable business model with more partners contributing to revenue growth
– Potential tension with partner businesses over commission rates – May face competition from restaurants with in-house delivery services – Need to maintain a positive relationship with partners
DoorDash, Grubhub, Postmates
Subscription Services
Some delivery apps offer subscription services that provide benefits like free or discounted delivery on orders for a monthly or annual fee. Subscribers are incentivized to use the app more frequently.
– Recurring subscription revenue – Encourages customer loyalty and frequent app usage – Opportunities for upselling and cross-promotion of premium services
– Need to continually add value to retain subscribers – Competition with other subscription services – Potential for service outages or disruptions to impact subscription holders
Amazon Prime Now, Instacart Express
Advertisement Fees
Delivery apps can generate revenue by displaying advertisements to users. These ads may promote featured restaurants, special offers, or other businesses looking to reach the app’s user base.
– Additional income stream beyond delivery and commission fees – Opportunities for targeted advertising and promotions – Potential for sponsored content and partnerships with businesses
– Balancing ad placement to avoid disrupting the user experience – Risk of user backlash if ads become intrusive – Competition with other ad-supported platforms for advertising budgets
Uber Eats, Grubhub, DoorDash
Delivery-Only Kitchens
Some delivery apps operate or partner with delivery-only kitchens, also known as “ghost kitchens” or “cloud kitchens.” These facilities prepare food exclusively for delivery, reducing overhead costs.
– Additional revenue stream from operating kitchen facilities – Ability to offer a variety of cuisines without traditional restaurant expenses – Potential for data-driven menu optimization and catering to customer preferences
– Significant upfront investment in kitchen infrastructure – Competition with traditional restaurants for market share – Need to ensure food quality and consistency
Delivery apps collect valuable data on customer preferences, order history, and geographic trends. They may monetize this data by selling insights to restaurants, advertisers, or other businesses interested in market research.
– Additional income stream without directly impacting users – Leveraging data to improve services and offerings – Generating insights that benefit partner businesses and enhance user experiences
– Balancing data monetization with user privacy concerns – Need to comply with data protection regulations and ethical data usage – Ensuring data security and preventing breaches
Uber Eats, DoorDash, Grubhub
In-App Purchases
Some delivery apps offer in-app purchases or upsell opportunities, such as premium features, customization options, or faster delivery times, for an additional fee. Users can enhance their ordering experience.
– Upselling and increasing average order value – Offering personalization and convenience options to users – Generating additional revenue beyond standard fees
– Balancing in-app purchases to avoid perceived upselling pressure – Ensuring that premium features provide real value to users – Risk of discouraging users with too many paid options
Uber Eats, Postmates, DoorDash
Driver Fees
For ride-sharing delivery apps, such as Uber Eats, drivers are required to pay a fee or percentage of their earnings to the platform. The app collects a portion of the driver’s income for facilitating the delivery.
– Additional revenue stream from drivers – Encourages a large driver network to meet delivery demand – Opportunity to offer drivers incentives and rewards
– Balancing driver fees to maintain driver satisfaction – Competition with other gig economy platforms for driver recruitment – Potential for driver disputes or dissatisfaction with fees
DoorDash is a platform business model that enables restaurants to set up at no cost delivery operations. At the same time, customers get their food at home and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.
Glovo is a Spanish on-demand courier service that purchases and delivers products ordered through a mobile app. Founded in 2015 by Oscar Pierre and Sacha Michaud as a way to “uberize” local services. Glovo makes money via delivery fees, mini-supermarkets (fulfillment centers that Glovo operates in partnership with grocery store chains), and dark kitchens (enabling restaurants to increase their capacity).
Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. In 2018 the company connected 95,000 takeout restaurants in over 1,700 U.S. cities and London. The Grubhub portfolio of brands like Seamless, LevelUp, Eat24, AllMenus, MenuPages, andTapingo. The company makes money primarily by charging restaurants a pre-order commission and it generates revenues when diners place an order on its platform. Also, it charges restaurants that use Grubhub delivery services and when diners pay for those services.
Instacart’s business model relies on enabling an easy set up for grocery stores, the comfort for customers to get their shopping delivered at home, and an additional income stream for personal shoppers. Instacart makes money by charging service fees, via memberships, and by running performance advertising on its platform.
Lyft is a transportation-as-a-service marketplace allowing riders to find a driver for a ride. Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters. Lyft primary makes money by collecting fees from drivers that complete rides on the platform.
Postmates is a food delivery service built as a last-mile delivery service platform connecting locals with shops. Postmates makes money by collecting fees (commission, delivery, service, cart, and cancellation fees). It also makes money via its subscription service (called Unlimted – $9.99/month or $99.99 annually) giving free delivery on every order of more than $12.
Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.
Key highlights of the business models from on-demand delivery platforms:
DoorDash:
Platform model enabling restaurants to set up delivery operations without cost.
Generates revenue through markup prices, including delivery fees, memberships, and advertising for restaurants on the platform.
Glovo:
On-demand courier service that purchases and delivers products through a mobile app.
Earns revenue from delivery fees, mini-supermarkets (fulfillment centers), and dark kitchens (increasing restaurant capacity).
GrubHub:
Online and mobile platform for restaurant pick-up and delivery orders.
Makes money by charging restaurants a pre-order commission and generating revenue from diners placing orders on the platform and using Grubhub delivery services.
Instacart:
Facilitates grocery delivery from stores to customers through personal shoppers.
Generates revenue via service fees, memberships, and performance advertising on the platform.
Lyft:
Transportation-as-a-service marketplace connecting riders with drivers for rides.
Makes money by collecting fees from drivers completing rides on the platform.
Postmates:
Last-mile delivery service platform connecting locals with shops for food delivery.
Earns revenue through various fees, including commission, delivery, service, cart, and cancellation fees, as well as its subscription service.
Uber Eats:
Three-sided marketplace connecting drivers, restaurant owners, and customers.
Restaurants pay commission on orders, customers pay delivery charges and potentially cancellation fees, while drivers earn from reliable deliveries.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
