Grab Singapore has clarified the amount of commission fee GrabFood receives, using a pizza to illustrate the breakdown via Instagram. This comes after the Restaurant Association of Singapore (RAS) recently called for food delivery players to lower commission rates during the COVID-19 period and also in the future. RAS told Marketing previously that the commission fees are between 25% to 32% for each order and described it very high given F&B's "razor-thin" margins. RAS was of the view that the food delivery companies are hampering the sustainability of F&B businesses who are largely impacted due to COVID-19.
Grab's Instagram post showed the breakdown of each delivery, and how much commission it is getting from each order. According to the post, merchant revenue takes up 70% or more of its order value, while GrabFood's commission comprises up to 30% of the order value. There is also a SG$0.20 platform fee per order.
The post added that its delivery fee goes entirely to its riders, and the commission GrabFood earns is partially used to top up its riders' incentives. Grab also used a slice of pizza to further breakdown where its commission goes to, including advertising campaigns for merchants, GrabRewards programme, product development and platform improvement, and Grab-funded promotions such as free deliveries and subscription plans.
Grab's post was captioned:"Are the commissions paid to delivery services fair? Get a closer look at who gets a share of the pie, and decide for yourself." It garnered 514 likes on Instagram as well as 396 reactions (a mix of likes, laughing, and angry) on Facebook at the time of writing.
The comments received show that netizens were not pleased with Grab's social post. Some pointed out that 30% is still too high of a commission rate especially in a time like this, while others feel that the ad is not representative of delivery fees because most orders are more than SG$25, which is the price point Grab based on for its social ad. Marketing has reached out to Grab for a statement.
While the Instagram post portrays a logical approach to the topic, Edwin Yeo, general manager of Strategic Public Relations Group, said there are "fundamental problems to this defensive thought process", especially during a time where all businesses are struggling.
He explained that the post might come across as lacking in empathy for businesses that Grab depends on.
The ad may seem like it lacks empathy for the people whose product Grab depends on for its own profitability.
According to him, the key stakeholders in any delivery platform service are the F&B outlets, and they are the ones who are one of the worse hit during the Circuit Breaker period. The target audience of the ad also comes into question. Yeo said that if Grab is trying to get its partners to to understand and agree that 30% is reasonable, it is a hard ask especially when most of them are trying to get enough cash to keep their business open.
"A public platform is probably not the best place to negotiate. After all, the end-users are not the ones Grab needs to convince. The better recourse would have been for Grab to privately meet with the RAS and come to a win-win situation," Yeo said. He added that a better statement would have been to assure consumers and partners that their concerns are heard and that the platform takes the sustainability of our F&B partners seriously. Grab should also inform of its plans to meet with RAS to find a win-win solutions for all parties.
Lars Voedisch, managing director of PRecious Communications, said the ad is Grab's way of sharing facts and adding transparency without getting emotionally involved, which is the basics of communication.
He added that there isn't necessarily right or wrong as all three groups (merchant, delivery, and Grab) are affected by the economic situation in one way or another. "At the end of the day, it will be up to the consumers to vote with their wallets - are they willing to pay more for a service that would pay more to their drivers," he said.
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