The thing I don't understand is 35% commission fees to the restaurant + $5 delivery + fees to the delivery driver. I'm guessing payment processing would be a few percent, but what makes up the rest?
It depends on user behavior. If the average Uber Eats customer opens the app then decides on a restaurant and not the other way around, Uber has a lot of bargaining power. It can tell restaurant owners “hey, you won’t make this revenue without us, so we’ll charge 35%. This is our access fee for that dollar on the sidewalk.”
The restaurant can say “screw you and your high fees, we’ll exclusively use [Grubhub clone] instead,” but they will most likely lose the Eats customers. Theoretically, in the long run, large platforms should compete more on price and extract less from customers and restaurants. This will only happen if customers migrate to a lower cost competitor.
There are two hurdles to price competition. One is that platforms are sticky and have psychic switching costs. The other problem is that customers don’t observe the fees which are charged to restaurants. They don’t know how much of the menu price reflects the cost of actual food vs. how much is Uber’s merchant fees.
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[ 3.0 ms ] story [ 20.4 ms ] threadThe restaurant can say “screw you and your high fees, we’ll exclusively use [Grubhub clone] instead,” but they will most likely lose the Eats customers. Theoretically, in the long run, large platforms should compete more on price and extract less from customers and restaurants. This will only happen if customers migrate to a lower cost competitor.
There are two hurdles to price competition. One is that platforms are sticky and have psychic switching costs. The other problem is that customers don’t observe the fees which are charged to restaurants. They don’t know how much of the menu price reflects the cost of actual food vs. how much is Uber’s merchant fees.