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Deliveroo mulls dynamic pricing model: Will it become a new norm?

Deliveroo has revealed in its updated terms and conditions that it is contemplating operating a dynamic pricing model, which could potentially impact prices of items and delivery rates. Should the new model be implemented, prices can change at any time while browsing, at the discretion of the merchants on the app. According to Deliveroo’s updated terms and conditions, the changes in prices will not affect existing confirmed orders, provided the basket is checked out within two hours.

When asked by Marketing on the dynamic pricing update, a spokesperson said Deliveroo does not currently have dynamic pricing for menu items. The spokesperson clarified that prices of menu items can potentially change due to Deliveroo or restaurants offering promotions, with the help of Marketer. Marketer is a service that enables restaurants to set up their own marketing efforts on the Deliveroo app, including the uploading and tailoring of promotions.

“We are completely transparent about any fee structure changes. Customers have full visibility to all pricing 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. The fees are clearly stated in our FAQ and T&Cs pages,” the spokesperson said.

Dynamic pricing in Singapore, while still relatively new to the food delivery industry, has been a staple in the ride sharing sector with brands such as Grab and GOJEK leading the charge. With its emergence in the F&B industry, former managing director of AIMIA, Kevin Kan, says that from a commercial context, this is yet another way for businesses to generate revenues during lull periods of the day.

Moreover, Kan said that from a business context, dynamic pricing is a strategic way of saying “user pays pricing”. Given various industries are now implementing similar pricing models, such as taxis, ride-sharing, hotels and even airlines, it makes perfect sense for the pricing model to hit the delivery industry as well.

Will consumers simply adapt?

If implemented, Kan says there is a potential initial uproar that will rise amongst consumers “but they will learn to adapt to dynamic pricing”.

After the initial outrage of profiteering and shock, consumers will use the platform as usual.

“People are prone to complaining when things they are accustomed to change – that is just human nature. It just gets magnified in the digital age with the plethora of social media platforms,” he said, citing examples on surge pricing on ride hailing apps and increase in airfares during school holidays. “While there are gripes among consumers, they eventually learn to live with it or adapt their behaviour and travels during non peak periods,” he added. Kan added that in a market like Singapore, the incremental cost of delivery might not always outweigh the convenience of having one’s meal delivered when one is time challenged.

Agreeing with Kan, Prantik Mazumdar, managing partner of Happy Marketer, a Merkle Company said the concept of dynamic pricing is not new as airlines and hotels have been practicing it, while commerce giants and ride hailing apps have mastered the art as well.

According to Mazumdar, as long as Deliveroo is transparent with its customers on the possible implementation of dynamic pricing and also laying out the mechanics and terms clearly, customers will understand and accept it. He added: “Most customers are already used to the concept and can potentially gain from the feature during off-peak periods as well.”

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