Comment: Talabat CEO explains position on commission fees
Tomaso Rodriguez says it cannot cut its fees by more than half as some have asked
Covid-19 is bringing change. Some change is temporary and some is permanent. From a commercial perspective, everyone is assessing their business viability and trying to overcome unprecedented and new challenges. Our sector is no exception. As a food delivery platform, we are finding ourselves in a unique situation where people rely on us to safely deliver food, groceries, and medicines to their homes, and restaurants need us to keep their business going.
And like most businesses, our focus is on doing everything we can to ensure people are safe and healthy, as well as ensure there is business continuity during Covid-19 and beyond - for us as a company, for our riders and for our restaurant partners.
This is why we have been introducing many safety practices and solutions, such as contactless delivery at an early stage. We were the first in the region to introduce gloves, masks and sanitisers for our riders. We started liaising with the government early February to raise awareness about high industry safety standards and the importance of allowing food deliveries.
Apart from keeping businesses open, the most important thing we have been doing for our restaurant community is to drive growth where possible and to recover lost orders. By developing additional safety measures and features and focusing on continued safety messaging, we have been bringing customer confidence back.
In addition, we have been incentivising our customers to support local businesses by introducing location-based free deliveries. Additional campaigns and promotions are helping to further drive traffic to our partners, and these incentives and campaigns require significant investments from Talabat.
On top of that we have also launched a straight forward community continuity plan to maximise the cash flow for 4,500 of our small and medium sized partners in the UAE, by deferring commission fees with a six month payment plan. According to a JP Morgan Chase Institute study, the average small and medium restaurant only has 16 days worth of cash flow reserves.
There are voices calling on Talabat and other food delivery platforms to go even further in bringing relief to the restaurant community, by suggesting we reduce our commission fees by more than half.
There are several reasons why we cannot do this, not even temporarily. First, when times are uncertain, asking businesses to voluntarily decrease the most important source of revenues by more than half to support other businesses in that supply chain, simply does not make business sense. It simply shifts the problem to a different part of the supply chain - at a time when restaurants need platforms more than ever. It doesn’t solve the problem and might actually make things worse for restaurants.
Talabat is a technology company. We operate a virtual marketplace which connects customers to restaurants, and restaurants to drivers - all through our platform. Our virtual platform is not different from any other business in the sense that it generates revenue and costs money to develop, maintain and operate - both online as well as offline.
A significant part of our revenue is generated through orders: commission fees from the restaurants for using our platform, and delivery fees from customers. Cutting these revenues by more than half will not just impact us. It will impact our ecosystem.
Simply put, our revenues are allocated in three ways: delivery, marketing and operations. The largest part of commission revenues, as well as a high portion of the delivery fee goes directly to paying for the delivery. Providing last-mile delivery costs money. Restaurant owners who run their own delivery operations can attest that they cannot do it at a lower cost than what Talabat is offering. Our scale and technology enable us to provide the best service in terms of coverage area and customer experience at the lowest possible cost.
Of the remaining revenue, more than half is used for the betterment of the restaurant community. This is through spend on marketing campaigns, promotions and other incentives to attract new customers and ensure existing ones keep coming back. We give restaurants access to millions of customers, requiring significant investment to bring them together.
The remaining revenues go to Talabat. We use this to pay our fixed costs - rent, power, water, admin etc, as well as our people. With well over 2,000 employees throughout the region, including over 150 product and technology engineers working on development and maintenance of the Talabat platform. Like any consumer facing business, we also have teams for marketing, sales, finance, people operations, legal, logistics, and customer care support.
Our extensive efforts will still not be sufficient to help the entire restaurant community get through the Covid-19 situation. We cannot and should not take on this responsibility alone. Yet, we have the responsibility to do everything that we can to get through these tough times with our restaurant partners.
We call on our community to come together to have an ongoing open and constructive dialogue with all stakeholders. We are here to listen and are firmly committed to get through this together.