Lately, there have been many discussions about food delivery – whether it is helping or hurting F&B businesses. Some think the commission that merchants have to pay is too high, and we wanted to share where that money really goes.
Q: How much is GrabFood charging merchants?
Merchant commission ranges. On average, we charge merchants around 15%-30% commission on the order value. In Thailand, the average order value is around 150-200 baht, and this works out to be around 22.5-60 baht in commission.
Q: Who gets the delivery fee?
The delivery fee from each order goes to our delivery partner. We also provide additional incentives to ensure they fairly earn a minimum amount per trip.
*Minimal commissions are sometimes deducted, however, drivers often earn more than what passengers pay after subsidies and incentives.
Q: Is 25%-30% commission too much? Where does the money go?
With this commission rate, we can ensure our delivery partners are fairly paid. It also enables us to manage platform services for online food ordering and delivery. Here’s where the money goes:
Example:
Pizza for 1 person
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- Total order: ฿150
- Delivery fee: ฿20 (estimated from 5 km delivery distance; delivery fee is customarily based on distance, supply-demand and may vary)
- Total paid by a consumer: ฿170
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Where does the money go?
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- To the restaurant: ฿105 (70% of order)
- To Grab: ฿45 (30% commission)
- To the delivery partner: Approximately ฿50-60 (delivery fee ฿20 and top up of incentive from Grab to ensure they earn enough, around ฿30-฿40 )
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The majority of our merchant commission goes towards paying our delivery partners. We believe our delivery partners need this boost, to cover their time and efforts adequately.
The remainder, if any, is used to cover operating costs, which includes delivery partner insurance, cashless payment transaction costs (eg. credit card charges of around 2.5-3% of the transaction value), product and service improvements, and backend manpower like customer service.
Q: Demand for GrabFood has increased, so you must be profiting. Why can’t you reduce merchant commissions, since people are staying home due to city lockdown?
An increase in demand does not directly equate to profits for us. GrabFood is not profitable and we don’t “earn” the full commission we receive. We use a large part of it to pay our delivery partners on top and above the delivery fees, they receive. This will allow the app ecosystem to run equivalently between merchants, drivers, and consumers.
Q: What has GrabFood done to help restaurants during this time of need?
As restaurants no longer have dine-in customers during this Lockdown period, the most important problem we want to help them solve is customer demand. How can we help to make sure they still get orders, and hopefully more orders than before?
Grab’s latest measures in assisting restaurant partners and small business operators
include:
1. Encourage ordering from small restaurants across Thailand through “Support Local Restaurants” campaign by offering a 15 baht discount on delivery fees when ordering a minimum of 150 baht and applying code “SUPPORT” through GrabFood.” The “SUPPORT” code is limited to 217,000 redemptions from 1 – 31 July 2021. The campaign is promoted on Grab application in the forms of category icon and banners and Grab-owned and paid media
2. Extend 0% commission for restaurant partners with Self-Pick Up service until 31 July 2021. Partners can see more detail on https://www.grabmerchantth.com/spu. Consumers are eligible for a 20% discount (maximum discount of 100 baht) on food when applying code “PICKUP20“
3. First 14-day commission exemption is offered to restaurants located in Bangkok, Nakhon Pathom, Nonthaburi, Pathum Thani, Samut Prakan, Samut Sakhon, and Yala. The exemption is eligible to restaurants that have never sold their services on GrabFood and is valid from 1 – 31 July 2021.
Merchant Business Support:
Grab has created GrabFood University website to provide information that can be helpful to our partners, hoping they would understand our platform better. The library includes information on how our application works, how can you easily check your orders, edit your own menus and create promotions. Grab University also provides answers to frequently asked questions. More information can be found here https://www.grabmerchantth.com/training
Boost your sales reach by expanding radius:
We are currently expanding the service radius up to 20 km during this lockdown period, to help our partners reach hungry eaters from homes further away. Delivery fees may be higher for longer distances, but rest assured these go towards compensating delivery partners fairly for the longer journey.
*In the same spirit of maximizing orders for our partners, please note that there may be changes to service radius during periods with unusual conditions (i.e. rain), so that our delivery partners can fulfill as many orders as possible.
Financial Liquidity:
Cash Flow is important for small businesses. Hence, Grab application allows our partners to receive the money transferred to their bank account the next day. Merchants can also check sales reports from the app and email we send daily.
Q: Did you increase any of your fees or commission?
No, We didn’t increase anything for GrabFood after the lockdown and won’t increase during the Covid time
The delivery fee can be varied based on the distance, however
– Users can still choose to order from the closer merchants with the lower delivery fee
– The increased fee (from a further distance) will go directly to drivers.
Note: GrabFood’s default delivery radius is capped at 10 km but during the Covid-19 period we expand to 20km to help restaurants. However, there may be changes to service radius during periods with unusual conditions (i.e. rain, Curfew), so that our delivery partners can fulfill as many orders as possible.
Q: Some delivery partners have shared that their earnings have also taken a hit. Are you paying delivery partners less now?
a) We have not made any changes to delivery fares for drivers, however, the number of jobs they get in a day can vary with changes in the market.
b) As for incentives, we actually have increased incentive rates in non-CBD areas *for the moment* to help support taking jobs there.
Delivery partners earn 100% of the delivery fee and tips. To ensure they are compensated adequately for their efforts, delivery partners also get an additional incentive from Grab.
We’re also introducing more product features that make delivery easier for our partners. For example, batching orders can help them receive more jobs in the same timeframe. This feature has significantly reduced the average roaming distance by approximately 40%.
The shortfalls of food delivery
We understand that the current food delivery model is not perfect. The cost to serve each order is still high. We have been working on optimizing the business model even before COVID-19 hit Thailand. We believe that technology can create better efficiencies for us, our merchant-partners, and delivery-partners. This will help reduce the overall cost to serve each order so that it’s sustainable for all parties on our platform.
We will keep trying to maintain a balance that considers the interest of all stakeholders: consumers, merchants, delivery partners, and Grab.