Why your delivered meals and groceries cost more than you think

Takeaway food delivery is not a new concept in South Africa. But what began in the early 1990s as sloppy, lukewarm burgers ordered by landline from a dog-eared fridge-magnet pamphlet and delivered by a mop-haired teen in a dinged Toyota Tazz has morphed into a multibillion-dollar industry.

Globally, estimates put the fast-food delivery service at $380.43bn in 2024. This will reach $618.36bn by 2030, according to projections by Grand View Research.

The South African slice of this is significantly smaller, but at least two players, Mr D and Uber Eats — both divisions of larger e-commerce and platform economies — are vying for their own share of the pie.

And though these platforms have made some progress in streamlining the process and ensuring the burger is at least tepid and upright on arrival, they are doing so at a double cost to the customer, who now pays both the delivery fees and the restaurant’s commission.

And now, as convenience stores get in on the action with everyday essentials and groceries, they are also making sure that when they sell you that late-night bag of Chuckles or a four-pack of toilet rolls, they are not the ones absorbing the fee that the gig-economy platforms charge them.

It is not news to most people that fast-food meals ordered on delivery platforms are more expensive than identical items purchased over the counter.

Order an original King Steer burger in store, and you’ll pay R119.90. Order it delivered by Mr D or Uber Eats, and you’ll pay R30 more — before each platform adds its own additional delivery or service fees.

A principessa margherita pizza from Col’Cacchio will cost you R145 if you order it in store — but the home-bound will pay R20 more before platform fees.

An Ocean Basket platter for two is marked at R455 on the restaurant menu, but if delivered by scooter to your dining room table, you’ll pay Uber Eats or Mr D R560 – a premium of R105.

The same trend continues across most restaurants in South Africa. What’s going on here is less about the cost of convenience, which is technically covered by the platforms’ transparently disclosed fees, and more about restaurants simply passing on the commission that the platforms charge them to consumers.

To its credit, Mr D makes this clear on a splash screen on its app. It states that “Mr D charges each restaurant a commission based on the value of the food ordered on the platform”, and that “menu pricing on the platform is set at the discretion of each restaurant and may differ from the in-store menu pricing or prices on other platforms”.

Uber doesn’t make its approach quite as clear, but its global website specifies that restaurants set their own prices on Uber Eats, which is why app prices may exceed in-store menu prices. In some markets, Uber tracks the gap through a “menu markup” metric that compares in-store and delivery prices, but this system is not published or explicitly referenced in South Africa.

Locally, Uber does not publicly regulate or restrict restaurant markups, nor does it disclose markup differences in the South African app interface. The company’s only clear local statement is that price-setting is entirely at the merchants’ discretion.

When these tech-based delivery platforms were launched, restaurants that did not want to miss out on the home-delivery income stream, or invest in their own delivery services, initially absorbed the commission — until they realised consumers were either oblivious to, or willing to accept, the markups.

These restaurant commissions are not disclosed, in part to avoid the platforms alienating consumers and other restaurants that may pay more. Often, these are specific agreements between the platforms and restaurants based on several factors. But research suggests that platforms will charge restaurants between 15% and 35% of a total bill.

This is intriguing but not entirely novel — until earlier this year, when Woolworths charged into the sector with its “After Dark” offering. It joined Uber’s push to expand grocery services.

This is notable, given that when household grocery delivery surged during the pandemic, funded by large retailers operating their own fleets, the two delivery models operated in silos.

The platform-based gig economy charged inflated prices plus delivery fees, while supermarkets offered identical in-store and in-app prices with flat-rate fees.

Five years on, what you buy on Checkers Sixty60, Woolies Dash or Pick n Pay ASAP is, for the most part, priced the same as in store. Unless, that is, you choose to buy your groceries from Woolies After Dark.

When the offering launched in a limited rollout in March, Woolworths said in a press release that “as on-demand delivery continues its meteoric rise, speed of delivery has typically been the defining feature”, and that its partnership with Uber and Engen Quickshops “suggests that the gift of time may be the next frontier”.

The luxury and wealthy minority market that these formal sector services target has no real price sensitivity

—  Bronwyn Williams

Bronwyn Williams, partner at Flux Trends, argues that this is a luxury that many in this sector are willing to pay for, as the service’s 4.7 out of 5 rating across 4,000 ratings shows. “The luxury and wealthy minority market that these formal sector services target has no real price sensitivity to speak of,” Williams tells the FM.

This is reflected in the supermarket’s aggressive rollout. In a recent radio interview on 702, Woolworths CEO Roy Bagattini said that by September this year, the After Dark offering was available in more than 70 locations.

But unlike the supermarket’s Dash offering, which competes with Checkers Sixty60 and Pick n Pay ASAP, this hybrid service quietly adds markups to familiar Woolworths products — much like the restaurants it sits alongside.

A 250g bag of Chuckles that costs R104.99 in store costs R121.99 using After Dark, before the variable Uber service fees. That represents a price difference of R17 and a markup of 16.2%.

A four-pack of toilet paper increases from R44.99 to R51.99. And an urgent purchase of Grabouw boerewors for a Saturday evening braai will cost R173.99/kg vs the R149.99 you would have paid in store.

According to a cross-section of random products available on Woolies After Dark in Cape Town, the FM found the markup to be almost universally 16%, with no indication to shoppers that what they are paying is significantly more than in store — or on Woolies Dash during daylight hours.

Though these markups are not declared, Williams argues they are not a hidden tax but rather “a price premium for the luxury of convenience”. She says the more pertinent debate is who gets paid for the convenience delivered. “The push towards toxic regressive American-style tipping culture is really a tax on below minimum wage labour, not the spoilt consumer.”

This is highlighted by labour law attorney Kgomotso Mufamadi, who points out just how complex this sector is for those tasked with getting the products to our doors.

“The gig economy, particularly in relation to food delivery, is a fascinating sector because there are so many moving parts and so many issues that need to be addressed from a regulatory perspective,” Mufamadi says. The markup exists so that drivers — and ultimately the delivery service — can be funded, but this does not mean that the income is trickling down.

“If you speak to most delivery drivers, whether they’re on Uber Eats, Mr D, Woolies Dash or Checkers Sixty60, many of them are desperate for supplementary income, which is why they work across several platforms. That tells you something about what they are actually paid. And because they are classified as independent contractors, they have no entitlement to a minimum wage in the way an employee would.”

Whether couch-bound consumers are aware of the added cost of deliveries — both in fees and commissions passed on by partner restaurants and grocery stores — is unclear for now. But it’s clear that many customers are willing to absorb the costs.

Those who brave the traffic at all hours in all weathers to get items to customers’ doors are the crucial but often overlooked link in this growing economy of convenience.