3 Reasons Why Is GrabFood So Expensive (A Detailed Breakdown)

Why Is GrabFood So

Food delivery has become a huge part of our lives.

However, the cost of having food delivered to your doorstep has been increasing as well!

Here’s a detailed breakdown on the cost of ordering with GrabFood:

Why is GrabFood so expensive?

Ordering food on GrabFood is expensive due to the extra parties involved. When you purchase food by yourself, it only involves you and the merchant. With food delivery, you include 2 more parties: Grab and the delivery partner.

With more parties involved, they would all want a cut of the order fee. As such, this drives up the price of your food.

Here are the reasons explained in-depth:

Base prices are more expensive compared to buying food from the store

You can compare the price of the food when you buy from the store directly with ordering from GrabFood. Most of the time, it will be more expensive when ordering from Grab!

Here’s a comparison at a chicken rice stall. When you purchase 1 plate of chicken rice from the stall, it only costs $2.50.

However, you pay $3.50 when you order it from Grab.

GrabFood More Expensive When Ordering From Grab

Grab charges merchants a 25-30% commission

On Grab’s website, they claim to charge merchants a 30% commission for every order on their platform.

However, you do not pay this commission when you do a self pick-up.

To make up for this extra cost, merchants will have to sell their food at a higher price compared to their original price.

This ensures that the merchant will still be able to receive their original selling price.

Taking the example above, a $2.50 plate of chicken rice would cost $3.25 on Grab’s platform (130% of the selling price)

In fact, eateries have already been charging more on delivery platforms since 2016!

Added cost of packaging to merchants

Another fee that merchants need to factor in are the packaging costs. This includes the costs of the plastic packaging and cutlery.

This is particularly for restaurants that do not usually provide takeaway services. With the COVID-19 pandemic, they have been forced to pivot towards providing delivery services.

These restaurants usually rely on reusable cutlery and plates which can be washed. With an increase in food delivery, they will now have to purchase plastic utensils.

Some stalls usually charge an extra 20 cents to account for this cost when you takeaway from their stalls.

If merchants factor in the cost of packaging into their prices on the GrabFood menu, this may bring up the price too!

Added costs result in higher prices charged to you

Grab does encourage the merchants to charge the same prices as their original menu. However, I do not think that most merchants will do this.

While delivery platforms have helped to expand the merchant’s reach, it has also added to their costs.

To cover these costs, they would need to charge higher prices on their platform.

Delivery fee is dynamic

Grab charges a delivery fee for every order that you make. This delivery fee is dynamic, and can change based on a few factors:

  1. The area you’re ordering from
  2. The time you place the order
  3. The merchant you’re ordering from

Grab does not give a formula on how they decide the delivery fee. However, a normal delivery fee usually starts from $2.50-$3.

GrabFood Normal Delivery Fees

There may be a higher demand for food delivery at certain times. Some of these peak timings include:

  1. Weekends
  2. Dinners
  3. Rainy days

When there is a higher demand for the delivery services, Grab may charge a surge delivery fee.

GrabFood Surge Delivery Fee

These fees are generally higher than the usual delivery fee. The surge fee is also similar to the higher fees charged by Grab’s ride-hailing service.

Delivery fees can be very expensive

Even without the surge fees, there are some restaurants that charge rather ridiculous fees. The highest I’ve seen so far is Haidilao, which charges a $23 delivery fee!

GrabFood Haidilao Delivery Fee

Other restaurants that perform islandwide deliveries will charge really high delivery fees too.

GrabFood Islandwide Delivery Fee

This is because these restaurants are really far away from you. As such, the fee that Grab pays the driver will be much higher too.

The delivery fee goes entirely to the delivery partner

Grab claims that the delivery fee that you pay goes 100% to their delivery partner. When the delivery fee is low, Grab may sometimes top up from the 30% commission that they earn.

This will give the delivery partner enough incentive to deliver the food to you. The fee that they receive needs to be enough to cover:

  1. The travelling time to the restaurant
  2. The waiting time for the food to be prepared
  3. The distance covered from the restaurant to your address
  4. The cost of petrol or maintenance of their bicycles

Moreover, delivery partners may earn extra bonuses when they complete certain trips. This is also paid by Grab’s 30% commission.

Grab no longer provides free delivery subscriptions

In the past, Grab used to offer subscription plans for their food delivery service. All you need to do was to pay $9.99 a month to receive free deliveries for up to 50 GrabFood orders.

Considering the price of the delivery fees, this seemed worth it if you frequently used GrabFood!

However, these subscription plans are no longer available. Grab now only offers a subscription plan for bubble tea.

GrabFood Subscription Bubble Tea

Grab may have removed the subscription plans as these could have added costs to the platform.

With these free deliveries, Grab would have to use more of their commission to pay the delivery partner instead.

Since Grab already has a huge customer base, having subscription plans may no longer be cost effective for them.

As such, it is not really worth buying subscription plans on Grab anymore!

Delivery fees may add up to the cost of your delivery

It is very important for you to consider the delivery fee when you order on GrabFood.

A customer previously questioned why he was charged a $14.50 service fee. However, this was because he ordered from a merchant that accepts Islandwide Delivery.

Since the merchant was very far away from the customer, the delivery fee was really high!

The high delivery fee was given 100% to the delivery partner, to compensate him for the long delivery ride.

As such, here are some suggestions to reduce the delivery fee that you need to pay:

  1. Ordering from restaurants that are relatively near to you
  2. Ordering at non-peak hours

Grab started charging extra fees to cover its costs

Grab only expects its food delivery service to breakeven by end 2021, which started in 2016!

It is a good thing that Grab has other services like it’s ride-hailing service and AutoInvest.

There are many costs incurred by Grab to run the entire food delivery service. This includes:

  1. Delivery rider fleet management
  2. Delivery rider insurance
  3. Tech and customer support
  4. Product development and platform improvement
  5. Payment processing fees
  6. GrabRewards programme
  7. Grab-funded promotions (e.g. free delivery)
  8. Advertising campaigns for merchants
  9. Launching new merchant support measures

Moreover, they may not get the full 30% commission from each order.

This is because some of the commission will go towards covering the fees for their delivery partners.

As such, Grab has started charging certain additional fees to help cover their costs:

$0.20 platform fee

Grab is now charging a platform fee of $0.20 for each GrabFood order you make.

GrabFood Platform Fee

Grab claims this fee helps to them improve their service and technology, to continue providing a good experience for you.

This will help Grab to cover some of the costs that it incurs for running this service.

Minimum order fee

One of GrabFood’s selling points was that there was no minimum order. You could order a cup of bubble tea if you wanted to!

However, this is no longer the case!

Grab now charges a small order fee if your total order amount is less than $8.

GrabFood Small Order Fee

The small order fee that you pay will make up your delivery amount to $8.

Grab must have realised that the margins are really low when they had no minimum order. The commissions that they earn from these orders are really low.

Moreover, there could be extra costs incurred when they accept such a small order!

As such, Grab has started charging a small order fee as well.

These extra fees will make your food more expensive

All of these extra fees will add up, particularly if you frequently order from GrabFood.

If you do not pay attention to the small order fee, the amount that you pay may be really exorbitant!

Conclusion

Running a food delivery service may incur a lot of hidden costs. Besides paying the delivery rider, Grab also has to pay other staff such as:

  1. Support i.e. customer service
  2. Marketing
  3. Tech

Moreover, Grab mentioned that they only receive $1 from a $21.60 food order. Even though there has been an increase in demand for food delivery services, it does not mean that Grab is able to profit from it.

With all of these extra costs, some of it will be passed on to you, the consumer.

Moreover, both the merchants and delivery partners need to have a sizeable cut of the delivery fee to continue using the service.

With so many parties involved, it is no wonder that the price of food delivery has shot up.

After considering all of these costs, you may decide to go down and eat at a nearby stall instead!


undraw pcsocial 16rw

Do you like the content on this blog?

To receive the latest updates from my blog and personal finance in general, you can follow me on Telegram and Facebook.

0 Shares:
You May Also Like