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  • Author: Anthony Jordan, Fellow UAE, Bord Bia - The Irish Food Board

     

    As the takeaway culture continues in the UAE and in particular Dubai, restaurants are beginning to rise up and take on delivery services for every last dirham.

    There is little doubt that foodservice has suffered heavy casualties as a result of COVID-19. As restaurants struggle to cope with lost income streams resulting from the lockdown, there has been heavy reliance on delivery to off-set reductions in the bottom line in whatever way possible.

     

    The mounting losses are inevitably going to lead to closures and job losses. However, is it likely that the seeming victors of the COVID-19 war, the delivery services, could be the next in line to face the indirect implications of the global pandemic. As restaurant losses grow, a new pressing question has arisen. Are the charges given to delivery services worth it?

    Back in April, it was reported that restaurants began to launch their own offensive on the delivery companies, calling on them to re-evaluate the percentage charges they take per delivery order. Charges range from 15% on the lower end of the scale, to as high as 35%. The rhetoric was that this was not sustainable for restaurants, with 10% reductions on such costs cited as a start to ease tensions.

     

    Initially, these higher charges were deemed reasonable as delivery was seen as additional revenue to dine in. However, as the paradigm began to shift, delivery order increased relative to dining in. High charges were now an issue.

     

    There is now a new deadly weapon in the restaurant’s arsenal. Some UAE-based online food order and delivery portals are introducing fixed monthly charges to Food and Beverage (F&B) operators in a bid to try and break the dominance of companies such as Talabat, Careem (who recently purchased Uber Eats) and Zomato. As already struggling F&B company’s margins are squeezed with excess charges, this newly proposed system may offer some well-needed breathing space. The concept also claims that reduced charges will benefit the consumer. The idea is that this newly formed alliance is a win-win for all combatants. Or almost all.

     

    During COVID-19

    A number of delivery services have offered a white dove to restaurants. Some have waived commission for the period during COVID, others allowed restaurants to withhold commission. Some reduced charges to as low as 10%. Others have negotiated deferring commission for six months. This is just temporary aid however.

     

    It has become apparent that such long-term calls for reduced charges may have fallen on deaf ears. For now. Talabat have claimed that to introduce such reductions does not make business sense and will impact another part of the supply chain. But as competition begins to rise in this space, in the form of fixed monthly rates, and losses for the delivery services such as Talabat, Zomato and Careem rise, they may have little choice but to alter their strategy.

     

    They say that battles are born out of battles of the past. As the Battle of COVID-19 is nearing an end, a new one emerges. The Battle for the Last Dirham will shape the future of delivery in the UAE and perhaps further afield. How it will impact similar models around the world remains to be seen. 

    References:

    Andrew, F. (2020). UAE restaurateurs urge food delivery apps to cap commission amid coronavirus. Available at https://www.thenational.ae/lifestyle/food/uae-restaurateurs-urge-food-delivery-apps-to-cap-commission-amid-coronavirus-1.999098 [Accessed 16 June 2020]

    Crompton, P. (2017). Revealed, Why the UAE is hooked on takeaway meals. Available at https://gulfnews.com/entertainment/arts-culture/revealed-why-uae-is-hooked-on-takeaway-meals-1.1978216 [Accessed 9June 2020]

    Nair, M. (2020). Fight back: UAE F&B businesses try to do away with delivery charges in fight against Zomato, Talabat and Uber Eats. Available https://gulfnews.com/business/retail/fight-back-uae-fb-businesses-try-to-do-away-with-delivery-charges-in-fight-against-zomato-talabat-and-uber-eats-1.1588316427035 [Accessed 16 June 2020]

    Nair, M. (2020). Dubai’s food outlets take on online food portals: Service charges of up to 35% on food deliveries 'way too high'. Available at https://gulfnews.com/business/retail/dubais-food-outlets-take-on-online-food-portals-service-charges-of-up-to-35-on-food-deliveries-way-too-high-1.71048618 [Accessed 9 June 2020]

    Warner, K. (2020). What restaurants in the UAE will look like after the Covid-19 pandemic. Available at https://www.thenational.ae/lifestyle/food/what-restaurants-in-the-uae-will-look-like-after-the-covid-19-pandemic-1.1018730 [Accessed 16 June 2020]

    Rodriguez, T. (2020). Comment: Talabat CEO explains position on commission fees. Available at https://www.caterermiddleeast.com/outlets/restaurants/84147-comment-talabat-ceo-explains-position-on-commission-fees