It seems that negative comments about food delivery companies abound online.
A quick glance at the Facebook pages of the food delivery platforms will reveal angry emojis and a large number of comments from users complaining about late, cold and missing food; And it seems that these complaints have skyrocketed in recent months.
Wilron Loh said he had ordered noodles from the WhyQ mobile delivery platform last week. He waited an hour, but his order was finally not delivered. He called the experience the “worst installment ever.”
Meanwhile, foodpanda user Brandon S said his payment was declined when he ordered his food, so he had to resort to buying his lunch elsewhere. Unfortunately, his card was loaded and he ended up paying for two lunches that day.
Food delivery giant GrabFood is also not spared from the heat.
Disgruntled user Irvin Ng said he is “completely disappointed” with GrabFood after his points were converted to a coupon after a canceled food order. He was dismayed that he couldn’t use the points to buy food from other merchants.
Another GrabFood user, Kylie L, said her missing orders took more than two hours to investigate.
The intensified alert from Phase 2 that just ended has once again exposed the infrastructure problems of the food delivery industry.
Last year, during the circuit breaker, there were also spikes in demand for food and orders. not delivered on time. Firms and experts attributed those problems to a relatively new industry and the sudden appearance of Covid-19, a period when food delivery companies did not have enough time to adapt quickly.
However, more than a year has passed since Covid-19 occurred. Even with time on your side, delivery issues persist.
Why are there frequent complaints?
“(Customer service) isn’t important until (tech companies) have a service problem, and then it becomes the deciding factor for a customer deciding to blow up the problem on social media,” says Walter Theseira. , associate professor and startups. expert at the Singapore University of Social Sciences (SUSS).
He added that the reason the internet is rife with complaints about poor food delivery services is because the industry is cheap to get into, but expensive to maintain quality service.
It is also expensive to build an efficient infrastructure due to high growth and operating costs.
So it’s about funds, but it’s not just about customer service in the sense of hiring people to take complaints, it’s also about investing in operations.
It’s pretty cheap to set up a website, find a few people to start delivering food, and sign up some F&B partners. The high overhead is that getting it right, particularly once you expand beyond a narrow geographic area or niche, becomes very expensive.
– Professor Walter Theseira of SUSS
Also, the food delivery model that typically hires “passengers on demand” makes it easier for standards to go wrong.
“If you rely solely on the on-demand delivery team, who are paid only when they have an order to execute, you will really run into trouble when you have unexpected (or even expected) increases in demand,” explained Mr. Theseira.
To improve their capabilities and reduce negative feedback, Nanyang Technological University (NTU) business school professor Dr. Clive Choo says that food delivery companies should invest in good software programmers and marketers.
“This will help them to continually improve their routing algorithm. Marketers may need to study the needs of a particular neighborhood and collaborate with food providers accordingly, ”he adds.
Why are prices rising despite intense competition?
Vulcan Post food delivery customers spoke up to say that food and delivery prices have been going up on some platforms.
When the news outlet tried to order two cups of brand-name bubble tea from White Sands Mall to a Pasir Ris HDB block 1.4 km away, a check on various food delivery platforms reveals delivery rates. inconsistent.
In one app, it costs between S $ 4 and S $ 6 just to deliver the drinks. That’s equivalent to the price of an extra cup of bubble tea. In two other applications, the shipping costs range from S $ 1.90 to S $ 2.50.
Experts attribute the highest shipping rates to the demand and supply of passengers on each platform. The work-from-home situation also means that there is more demand for food delivery in the heart.
One expert says that higher rates may also be to reflect better numbers to support companies’ listing plans.
“Food delivery applications are under increasing pressure to improve margins, especially since several are now public corporations or intend to go public soon,” says Mr. Theseira.
As for higher food prices, Dr. Choo says it could be that food suppliers are being squeezed into their profits by food delivery companies. “Another way of looking at this is that food delivery companies are not willing to bear this cost,” he suggests.
The Singapore government had provided a short term relief for F&B Eateries for Phase 2 HA, funding five percentage points of commission costs charged by Deliveroo, foodpanda and GrabFood.
The usual commission charge is 30 percent of the total food order.
Experts say that as more get vaccinated and the nation recovers from Covid-19, delivery companies may have to consider adjusting their commission rates to retain both customers and food providers.
“There is substantial evidence that logistics companies, which is part of what food delivery offers, have substantial economies of scale … I expect the market to tend to have a small number of large players, possibly with niche platforms. with a particular specialty that also coexist ”, says Mr. Theseira.
Be careful where you park your money
Covid-19 has led to the emergence of new food delivery companies.
In March, AirAsia launched its food delivery service in Singapore, offering free delivery promotions to attract customers.
At the time, the group said it had more than 500 passengers and around 300 food operators. It also claims to offer lower commission rates compared to competitors.
As much as these newcomers provide choice and variety, experts say consumers and merchants should be more careful with less established providers in this space, especially if the company’s business model is to act as a middleman and hold cash during the transaction. .
“You really need to assess the credibility of the platform or the merchant. It is extremely difficult to recover small losses or refunds if the services are not provided, unless the platform voluntarily offers such a refund, ”says Mr. Theseira.
It could also take much longer to break even for new start-ups, unless there are continued funds to achieve economies of scale to support their operations and application development, such as an efficient routing algorithm and state-of-the-art delivery routes. mile, says Dr. Choo.
It adds that customers’ ‘stored value’ or prepaid amounts could be lost when the food delivery company leaves.
I don’t recommend consumers go to food delivery companies that use subscription or prepaid business models. (You) must pay as you use them.
– Dr. Clive Choo from NTU Business School
If payments are made by credit card, there is the possibility of canceling the charge, but other types of payments are not likely to be recoverable at a reasonable cost in case the business fails or is not fulfilled, the experts add.
“I don’t think most startups enter the industry with the intention of misleading customers, and offering services at a loss is a well-established method of gaining market share upon entry. The fact is that entering this industry is cheap but expensive to master, and not all startups will be in a position to maintain their business or provide the right services, ”says Mr. Theseira.
Long-term concerns about the food delivery industry
Despite many structural growth problems, food delivery services will continue, experts say.
in a survey conducted in January this year, 80 percent of respondents admitted that they are ordering from food delivery services more than ever, and half said they order food more than once a week.
Older Singaporeans are also embracing food delivery platforms. 81 percent of respondents ages 45 to 54 say they rely more on food delivery services to order their meals.
With more people wanting to have food delivered to their doorstep, the onus is on the platforms to improve their services.
Mr. Theseira suggests that food delivery companies consider the cost model when hiring passengers to ensure quality deliveries.
“I would say that food delivery services would like to have as much control over passengers as possible, so that they can provide predictable service, but they don’t want to pay the costs of turning passengers into employees.”
“Delivery staff are incentivized to complete deliveries as quickly as possible, which means a certain risk of being reckless,” says Mr. Theseira.
Turning to labor market issues surrounding the economics of temporary jobs as a whole, Mr. Theseira notes that any increased regulation and protection of the labor market would likely raise costs significantly.
For public health, he says there hasn’t been a major problem, as the short period of time between food preparation and delivery doesn’t really present much of a risk, and the food is usually sealed by the restaurant.
However, platforms should have high standards of food hygiene, or perhaps introduce food safety courses to help workers better understand the requirements. Or be prepared to face bad press, if something unfortunate happens.
“It is always a concern that mishandling, etc., may introduce food safety risks,” he says.
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