Comment by wmab
6 years ago
Yeah, Grubhub were touting themselves to restaurants as more of a marketing channel partner - find customers, advertise etc. Still, I'm not sure why that business service warranted a 20% commission fee in the first place to be profitable from.
Because who is going to balk at more sales for slightly less of a cut unless you have priced yourself to the bone already anyway?
Tech is all about inserting yourself in previously untransactable business opportunities via the leveraging of near universal connectivity to the Net, and the ease of electronic transaction settling.
Sometimes, this means taking a momentary haircut to get the right signatures in place, but fee taking and leveraging economies of scale does the rest.
The big head scratcher for me personally is how long it'll take until most people catch on to the pattern, and say "no more".
20% fee isn't the whole story - about 5% is the cost-of-fulfillment - website, phone support, CC processing, fraud protection, etc. The rest of the "fee" is variable marketing and promotions costs - higher search placement, "buy one get one" offerings to customers, etc. The calculus for the restaurants is whether they spend any marketing budget, and if they do, is it going to be junk-mail flyers or targeted advertising that they have some hope of tracking success with.