Deliveroo irks consumers as it quietly adds on service fees

Deliveroo has quietly made some switches to its fee structure which has led to it being called out by consumers. According to an article on The Straits Times, the move was a "surprise" for some customers who were now presented with a service fee. A quick check on Deliveroo's Facebook page also showed consumers sharing their unhappiness over the hike.

The move comes shortly after Deliveroo removed its minimum order of SG$12 late last year in selected neighbourhoods after it saw a 30% increase in heartland restaurant partners, along with a 50% increase in orders in the heartlands since the start of the year, according to a Channel NewsAsia article. However, for areas outside of the selected zones, the minimum spend of SG$12 still applied.

While the move hasn’t been the most popular one amongst consumers, Siddharth Shanker, GM of Deliveroo Singapore said that this comes as Deliveroo expands its service and operates in more zones. When asked how consumers will get to know about the new structures, Shanker said, customers have full visibility to all pricings as they go through the app and check out their orders. In-app, customers can tap on the ‘i’ icon next to each fee for more information explaining what each element is.

When asked if this was a u-turn on the service removing its minimum spend proposition, Deliveroo did not comment at the time of writing.

“Deliveroo is completely transparent. Our fee structure changes as we seek to give customers the best price, selection and service," he said. He added that the company takes all customer feedback seriously, and all enquiries go through our customer service team.

“We are looking into the feedback on the recent change to our fee structure, and are always seeking to find the right balance between making sure we have the best prices and that we can continue expanding in Singapore and improve the delivery experience,” he added. Shanker also said that at the end of last year, customers on average saw more than twice the number of restaurants compared to the start of the year. He said:

Deliveroo wants to continue this expansion, operating in more areas, with more restaurants and more riders, with a larger HQ team.

To help achieve this, he added that the food delivery service recently updated its fee structure to introduce a small service fee, “which allows it to further expand services and bring more restaurants and more choices on the platform”. He added, "This is fully transparent to consumers in the app."

According to the company, a service fee will be applied to all orders.  Meanwhile, a charge will be incurred for the small order fee (orders which do not meet a certain value), which is similar to the minimum order value set by other food delivery providers. The fees are variable and will depend on the customer’s order value, said Shanker in a statement to Marketing.

“We are seeing more customers increasingly wanting to order in smaller portions, but to meet this demand, ensure we can pay our riders fairly, continue increasing our selection and continue expanding, we introduced a small charge on the lowest value orders,” he said.

The company added that delivery fees depend on factors like distance and time taken to deliver each order. “We have enabled customers to be able to order from further afield, meaning a wider choice of restaurants to order from, more sales for restaurants and higher fees for longer deliveries for riders,” he said.

Dynamic delivery fees can be higher or lower than the current static fee of SG$3. This is capped and we expect many customers to see some cost savings. At the moment, dynamic delivery fee does not apply to Deliveroo Plus subscribers. No Plus customer is charged a delivery fee - that is the value of Deliveroo Plus and that will not change.

Educating consumers when changing pricing

While it doesn't come as a surprise that brands need to rework their pricing models to remain viable from a business standpoint, Marcus Chew, CMO of NTUC Income said it is always wise to offer additional benefits or value with the price increase. Chew added in the case of food delivery services, ideally ample time should be given to consumers since the company has registered customers details readily available. While it might be harder to add value in this competitive space, the brand needs to be transparent on why it needed to increase price.

The brand can also create a limited time promotion or campaign, with full transparency on its upcoming price increase to cushion the impact.

Prantik Mazumdar, managing partner, Happy Marketer said that when businesses change their pricing models, it is important to leave time to educate and inform the customers proactively about the change to mitigate negative feedback from customers.

"Businesses have the right to set its preferred pricing and commercial models as it deem fit. But it is in the company's best interests to not have the pricing options made available on its website/app, but to proactively market and educate the customer base so that the price change is not perceived to be a sly act," he added.

Mazumdar highlighted that several modern businesses plan this way ahead of time, before marketing the policy changes via email, SMS, app notifications and/or even display/TV campaigns. This is to provide a heads up and get a buy-in. However, he said that the least Deliveroo could have done is inform its Plus customers.

Manisha Seewal, CMO of Carro added that is no best way to declare additional charges. “The worst way to do it is to slither it in. If the charges are at par with the market rate, then it’s justifiable and can be positioned as that. Moreover, ample time needs to be given,” she added.