Two of the Middle East’s biggest food delivery operators are slashing the high commission costs criticised by struggling restaurants in a bid to disrupt the region’s $3bn market.
Careem, the ride-hailing app acquired by Uber for $3.1bn in 2019, said it would replace percentage-based commission with a new fixed monthly charge for merchants on its application, which spans ride-hailing, food delivery, shopping and bike rental.
Noon, an ecommerce joint venture between the Saudi sovereign Public Investment Fund and Emirati investors, told partners last week that its Noon Food app would undercut commissions charged by incumbents, which include Deliveroo and Talabat.
Food outlets in the region have been complaining about commissions of up to 35 per cent charged by delivery platforms, even as the Middle Eastern food delivery market grows by up to 15 per cent a year.
Strict regional lockdowns to combat coronavirus have devastated swaths of the hospitality and entertainment industries, causing many closures and redundancies.
“The industry structure is not sustainable,” Mudassir Sheikha, chief executive and co-founder of Careem, told the Financial Times. “If restaurants are not happy serving delivery customers, then the food will suffer — there is a role we must play in making this industry sustainable.”
Careem said its new subscription fee-based model, which it is rolling out in the UAE and Saudi Arabia, would return a minimum of 5 per cent more value on small orders, rising to more than 17 per cent on larger ones, giving merchants a “much larger share of the pie”.
“It took a drastic event like Covid to enlighten people of what was really happening to the operators,” said Abdul Kader Saadi of Glee Hospitality, a consultancy and restaurant management firm. “This is a big relief.”
Mr Sheikha said food delivery had grown fourfold since the pandemic struck and now accounted for almost a third of business on Careem’s so-called superapp — which has expanded beyond its origins in ride-hailing into other offerings including groceries, payments and bike rental.
Ride-hailing, hit hard by restrictions to combat Covid-19, has been recovering with 10-fold growth since the nadir of last May, but he still only expects it to return to pre-pandemic levels by the end of this year.
The company is also opening its platform to third-party providers, starting with home services in the coming weeks.