Dubai: Can a zero commission arrangement work in a delivery and restaurant relationship? Abdullah Al Mutawa believes it can work.
The founder and CEO of Get Cari platform is not charging commissions of F&B operators for any orders processed through it. Instead, the portal’s focus – and that of Al Mutawa – is to get more orders streaming in from customers, and which can fuel a self-sustaining business.
The zero commission comes to a marketplace where the norm is for 15-30 per cent of the order value being taken from the restaurant by the portal. Going zero will make Gat Cari’s task harder but Al Mutawa has a plan.
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“Instead of relying on commission fees and increasing take rates, we implemented a customer acquisition cost model,” he said. “This means we charge restaurants a fixed amount for the first order we bring.
“After that initial order, restaurants are not charged anything for any subsequent orders placed by the same customer. This ensures restaurants are not burdened with high commission fees and can benefit from the network effects of our platform.”
In the past, there have been attempts to go in for a no-commission structure after considerable heat built up into relationships between delivery platforms and F&B entities. It reached its peak during the height of the Covid phase when F&B was going through an existential crisis, and aggregator platforms – who took orders and delivered – stepped into the breach.
Since then, commission structures have come down, but there are still tensions simmering beneath.
“While there are many players in the food delivery market, we believe that most are using the same outdated business model that prioritizes short-term gains. These platforms are more concerned with their own growth than the success of the restaurants they partner with, and they charge exorbitant fees that eat into restaurant margins.
“We understand that restaurants need to own their data and have the ability to retarget customers without incurring additional costs every time they order.”
Going for zero
Through recent months, businesses have sought to tide over consumer concerns on mounting costs related to services through multiple ways. Worried about remittance charges? Then, there are zero fees being offered by some service providers, though for limited periods.
On credit card spending, especially on must-have grocery purchases or school fees, banks are extending cashback options to their cardholders. The thinking is any dirham saved can help.
Reducing commissions on delivery seems like an obvious solution. But delivery companies cite their cost of operations that have kept rising. “We realise that restaurants have to deal with food prices and rent increases, but inflation hits all businesses,” said the head of a delivery provider.
Get Cari’s launch expenses
For the launch, funding was tapped from a group of investors in the region. “Our investors share our belief that Cari is uniquely positioned to challenge this status quo and introduce a more balanced and sustainable revenue model,” said Al Mutawa.
On whether the actual delivery has been outsourced, he said: “We believe by working collaboratively with our delivery partners, we can continue to provide the best possible experience for everyone in the Cari ecosystem.”
The initial focus is on launching in Dubai, and then expand to the other emirates.
“A few years ago, my brother Musab and I co-founded a commission-based food delivery platform called Carriage, which was later acquired by Delivery Hero,” said Al Mutawa. “Ironically, after we left we realized that the traditional commission-based model is fundamentally flawed and detrimental to the restaurant ecosystem.
“As platforms establish stronger network effects, they increase restaurant commissions, reducing vendor gross margins and increasing fees to end-consumers. This not only limits the market growth significantly but also undermines the very essence of food delivery.
“Moreover, vendors who try to do it on their own face a host of challenges, including high customer acquisition costs, low customer lifetime values, and the lack of network effects.
“We knew there had to be a better way.”
And in the form of zero commissions…