When Postmates started delivering Starbucks back in 2015, the deal came with a glaring drawback: Postmates’ $5.99 delivery fee applied to any order, even if it was a single beverage. While it was fun and novel to try getting a tall latte delivered to the office once, just to say you did, most of us wrote the concept off as impractical and unsustainable.
Times have changed. Coffee delivery with reasonable delivery fees is now a thing, along with smoothies, Big Macs, $1.19 bean burritos, and pretty much anything else you can imagine. That’s thanks to the fact that off-premise sales are now 38 percent of total restaurant sales and growing, and, according to a recent forecast by Technomic, much of the growth comes from the rise of third-party delivery sales.
That makes now the perfect time to rethink delivery fees, and a growing number of companies are now looking to the subscription model.
Think Netflix for food delivery: You sign up for a monthly membership, and in return get unlimited delivery on food in your area. For third-party services, the subscription route offers users competitive pricing options that will (hopefully) keep the diehard delivery fans loyal to the service. In its forecast, Technomic noted that “subscription models that eliminate per-delivery fees in favor of a flat-rate subscription will emerge to present a clearer value proposition to customers.”
As this is a fairly nascent practice, it’s far from perfect at the moment, with restrictions and limitations that could put some people off. But the mere fact that most of the major delivery players now have some presence in the subscription model space suggests it’s an area of delivery we should watch closely over the rest of 2019. Here’s what folks are up to:
DoorDash unveiled its DashPass in August of 2018. For a monthly fee of $9.99 you can order as much delivery from participating restaurants as your heart desires and your pocketbook can manage. In a blog post, DoorDash called out some big-name chains as participants, such as Wendy’s, The Cheesecake Factor, and White Castle, suggesting major restaurants are at least partially on-board with the subscription-style business model.
Right now there are a couple restrictions with DashPass: orders have to be over $15 to qualify for DashPass, and the pass only applies to certain restaurants. For example, I’m writing this post from Nashville, TN, where DoorDash tells me 110 restaurants are available for DashPass, which is hardly the extent of Music City’s culinary landscape.
Postmates offers a similar service, and has done so since 2016. For $10 per month, you can use the Plus Unlimited service for delivery orders over $15. As with DoorDash, the program only applies to those restaurants participating, which limits your options somewhat. Postmates also promises member deals and discounts.
In the UK, Deliveroo rolled out a subscription service last year called Deliveroo Plus. At £7.99/month, it’s a steal for anyone ordering just a few meals per month. (Deliveroo typically charges a £2.50 delivery fee per order.) There’s no order minimum, either, making Deliveroo’s service something like the Amazon Prime of food delivery.
Uber Eats started testing a loyalty program in the UK last year that would potentially do away with delivery fees. Thus far, it hasn’t come Stateside. Grubhub, still the leader in third-party food delivery, hasn’t yet dabbled in subscriptions, either. But I wouldn’t be surprised if either of those two have something in the works.
The key to a successful subscription offering will ultimately lie in how much choice services can offer consumers while still providing a delivery-fee-free package. If that’s pie-in-the-sky thinking at the moment, I doubt it stays that way for long.
While this sounds great to the consumer, the economics of this don’t work out for food delivery, just like it didn’t work for MoviePass. There’s a significant cost to the company with each order that doesn’t go down when someone orders more frequently. People who subscribe will easily cost the company more in delivery costs than they make in subscription fees. $15 of food means the company is getting $4 in margin from the restaurant — at best. That doesn’t even cover what they pay the drivers, not to mention their own overhead. Speaking from experience running an on-demand food delivery service for the past 15 years (and trying subscription models twice).