September 14, 2020
Why online ordering doesn’t have to cost you your profits
Why online ordering doesn’t have to cost you your profits

Since lock-down, demand for online ordering has sky-rocketed.  And it’s no wonder if you look at some of the remarkable successes operators have had with it over the past few months:      

 

Online ordering successes: 

  • In 3 months since June, this restaurant took almost $6m in online order revenue 
  • Since lockdown, this restaurant has experienced a 21% increase in average transaction value
  • A restaurant reported 70% were repeat spenders since lockdown compared to 50% prior to lockdown via online ordering

  

Many brands who may not have considered digital ordering pre-pandemic are certainly scrambling to implement it now.  But the decision isn’t easy when you look at both the number of suppliers in the market and the many ways they’re charging for this service.  

The good news is, we’re here to help.  We’ll take a look at some of the most common pricing structures and what makes most sense for your brand when deciding on an online ordering solution. 

 

Per Transaction – percentage 

A provider might charge you as much as much as 15% (or more!) of the value of every transaction made through their platform. 

Example: 

If a customer orders $40 worth of food online, $6 of that would go to the online ordering supplier. 

As an operator, this type of pricing is a good way of limiting risks of high overheads during extreme fluctuations of customer volume.  It means you only pay for the service when you’re taking orders.  This contrasts with a monthly fee, where, during low season, you might end up paying for an online ordering service which isn’t taking many orders. 

You’re probably already familiar with this type of pricing as it’s a common way for payment providers to charge operators for payments using PED.  For every transaction that goes through the device, the payment provider could charge you 4%, for example, for the service.   

Charging a commission per transaction de-risks turning on an online ordering solution as there’s no capital expenditure, everything is moved to OPEX.  However, it can become costly depending on how high the commission fee is.  Some 3rd party delivery providers can charge up to an eye-watering 30% commission which puts a serious dent in any operator’s profit margin.  

  

Cents on the dollar  

This is similar to the pricing concept above, but you pay a set amount for every order processed through the platform. 

Example: 

10¢ for every order placed, regardless of value. 

Again, as an operator, it protects you against peaks and troughs throughout the year as you’ll only be charged when someone makes an order through the platform.  It is also preferable to paying a percentage of the transaction because it is a set amount.  You pay 10¢ regardless of whether your guest has placed an order of $50 or $150.   

  

Monthly fee, per store. 

This is where you’d pay a set fee for each store. 

Example: 

$80 per store, per month 

If you’re a large, multi-store chain, this type of pricing has its advantages because regardless of the number of orders you’re taking or the value of these orders, you’re still paying a flat $80 per store every month. 

To compare this to the other pricing structures above, if you’re a brand with 100 stores taking 500 online orders per store a day, with an average of $30 per order: 

  • Per transaction (at 15%): total cost per day across your estate = $225,000 
  • Cents on the dollar (at 10¢): total cost per day across your estate = $5,000 
  • Flat monthly fee (at $80): total cost per day across your estate = $258  

 

Other fees  

Additional fees you need to consider include set-up and consulting fees.  For example, some providers might charge a flat set-up fee of, say, $250 per store or they might charge by the hour depending on how long or complicated the set-up is.  Some suppliers might also charge consulting, or professional services fees which can include developing a very bespoke solution that is highly tied to your brand and fully integrated into multiple back end systems.   

At the end of the day, a pricing structure that might work for one operator may not work for another. So, even though a straight percentage model means you only pay for what you use, it’s not very predictable and can get expensive quickly. In contrast, a transaction fee model is more predictable and can affordably scale and a fixed fee means the more you process the cheaper each order becomes.

If you want to learn more about our digital ordering pricing and how we can help you protect your profits, click here!    

 

Felicity Williamson
Marketing Executive