Payment processing company Square announced today the launch of its new On-Demand Delivery for its customers using the Square Online Store. The service allows restaurants and other sellers to take and fulfill delivery orders directly through their own websites, rather than going through a third-party delivery service.
Off-premises eating had been a growing portion of the restaurant industry’s revenue before the pandemic hit. Once restaurants were forced to close down dine-in operations out of COVID-19 concerns, delivery and curbside pickup became the only way restaurants could stay afloat.
But typically if restaurants want to offer delivery, they need to sign up for a third-party delivery service like DoorDash or Uber Eats. Those third-party delivery services charge high commissions and fees that basically gobble up most of the money a restaurant earns and drives up the price for consumers.
Square is letting restaurants bypass some reliance on those third-party delivery services by letting restaurants accept delivery orders directly on their own websites. From a Square blog post today announcing the new feature:
When an order is placed on the seller’s online store, a courier from the restaurant’s delivery partner is dispatched to the business location, picks up the order, and delivers it to the buyer. The buyer receives text updates with links to live maps to track delivery progress. Sellers pay a flat fee of $1.50 per order to Square, plus a fee to their delivery partner that is calculated in real-time based on distance and other factors. Sellers can pass this fee entirely to the buyer or offer custom delivery promotions. When applied across hundreds of delivery orders each month, sellers can save a significant amount on per-order costs.
There are some devils in these details. For instance, Square’s On-Demand delivery is now powered by Postmates, which itself a third-party delivery service (Square says more courier services will be added). Per Square, the restaurant is still paying Postmates a fee “based on distance and other factors.” The question then is, how much cheaper is it for a restaurant to take the delivery order directly and just use Postmates as a courier than it is to take orders via Postmates? Because part of what you pay for with a third-party delivery service is access to their large marketplace of customers looking for something to eat. Will abandoning third-party services save enough money?
Regardless, this is another example of the continuing evolution of the restaurant industry trying to navigate this pandemic and beyond. Third-party delivery services were a hero, then the villain. Restaurants that had once outsourced delivery are now looking to bring it back in-house, or create some type of hybrid solution.
Square’s On-Demand feature is more fuel for even more change.