Deliveroo Could Bank £11 Million Per Year From New ‘Service Fee’

From today, 7 February, each and every Deliveroo order in London is subject to a £0.50p service fee. According to the information available pre-checkout, Deliveroo uses this money to “bring you more exciting new restaurants and keep improving our service.” Based on a Financial Times estimate in 2017 that London restaurants were serving 60,000 orders per day, this fee would net the company £10,950,000 per year in London alone, assuming no growth over 12 months — an extremely unlikely state of affairs, with the U.K. restaurant delivery market currently valued at around £8.1 billion.

The service fee is applicable to both ‘regular’ customers and customers signed up to ‘Plus,’ which trades a £7.99 per month fee for free delivery on all orders. Some teething problems have led the fee to be labelled as “delivery” on some receipts, but this has reportedly been fixed. A Deliveroo spokesperson said:

Deliveroo is committed to delivering amazing food for any and every occasion, whether from family favourites or unique and exciting new brands. We have added more restaurants to Deliveroo, extended delivery areas and at the end of last year customers on average saw more than double the number of restaurants on the platform than they did at the start of the year. This year, we will be investing in further increasing the selection, working with more restaurants, more riders and enabling customers to order from even further afield. As part of this, we have introduced a small service fee, which will help Deliveroo to expand and improve our service and bring more restaurants and more choice wherever people are.

Eater London

Deliveroo is not currently profitable, and an investor deck leaked last year revealed that replacing riders with robots and making its own food — i.e., cutting out some restaurants from the platform all together — were potential steps towards changing that. With the £0.50 per order likely to be perceived as an extremely low barrier to ordering by the majority of customers with the disposable income to order food from restaurants, it’s a canny, high capital move. Uber Eats’ delivery fee sits at £2.50, with an additional £1 levied on McDonald’s and Starbucks.

The marked focus on increasing restaurant selection and order catchment area is also worth noting. The MCA report that valued the delivery market at £8.1 billion also noted increases in “awareness” for competitors Uber Eats and Just Eat, with Deliveroo’s remaining flat by comparison. This isn’t straightforwardly negative: market ubiquity, which Deliveroo could have some claim to, makes for static awareness; it’s not possible to grow rapidly if diners already know about a company. In the context of Deliveroo ceding market share to Just Eat, a reasonable analysis might be that providing more restaurants and wider order radii are the two steps to recover that market share.

It also takes another step towards proving what that investor deck implied: for the company to succeed at scale, someone in the supply chain, be it customer, restaurant, or rider, has to take a hit. On this occasion, it’s the customer.