Food Delivery App Prepares for Post-Pandemic Patterns
DoorDash Reworks Restaurant Delivery Pricing
DoorDash (DASH), a leading food delivery company, is changing the rates it charges restaurants as it positions itself for a post-pandemic world.
Customers and restaurants flocked to DoorDash at the height of the pandemic. Now that many people have received COVID-19 vaccines, both restaurants and consumers have more options. In response to these changing market conditions, DoorDash is offering more pricing flexibility to restaurants.
The changes are also a result of pushback from restaurants. During the pandemic it was common for small restaurants to pay delivery apps a 30% cut of orders. This hurt restaurants’ bottom lines, though often they had no choice because they could not serve customers in person. Regulators in New York, San Francisco, and Seattle even stepped in to cap the amount delivery apps could charge restaurants.
DoorDash Passes Costs to Consumers
DoorDash’s new pricing system began yesterday. Restaurants can now choose between paying a 15%, 25%, or 30% commission per order. The higher the rate the more marketing and product support restaurants will receive from DoorDash. The delivery app also lowered its commission on food picked up at restaurants from 15% to 6%.
To cover its losses from the pricing changes, DoorDash is passing costs to consumers. If a restaurant chooses the lowest commission rate, consumers will pay more for delivery than if it opts for the higher rate. Consumers will pay an average fee of $4.99 per delivery from restaurants which choose a 15% commission, and will pay an average of $1.99 per delivery from restaurants paying DoorDash’s 30% fee.
Pandemic Relief Coming to Restaurants
Many restaurant owners cheered DoorDash’s decision to change its pricing. Restaurants also received another piece of good news yesterday: The Small Business Administration will start accepting applications on May 3 for a $29 billion grant program aimed at helping the industry get back on its feet.
The Restaurant Revitalization Fund enables restaurant and bar owners to receive grants that are equal to their pandemic revenue losses up to $10 million. It is the first pandemic relief focused specifically on the restaurant industry, which has struggled during the pandemic. Last year sales at restaurants and bars plummeted by nearly a quarter and more than 110,000 restaurants and bars were forced to close temporarily. Now, thanks to vaccines, new delivery systems, and government assistance, restaurants are beginning to see a light at the end of the tunnel.
Are You Ready to Be Your Own Boss?
Do you have a great idea to bring to market, a passion for an existing market or industry, the drive to make the world a better place in some way, or all the above? Join Korn Ferry Advance career coaches to discuss what’s involved in launching a business—the pros, the cons, and the important questions you need to be asking yourself. Register in the SoFi app to reserve your seat!
New Bill Aims to Address Homebuyer Disparities
Surging Home Prices Shut Buyers Out
Earlier this week, Democrats introduced new legislation aimed at making it easier for first-time homebuyers to contend with soaring house prices. Many people have moved out of cities and purchased homes during the pandemic, which has contributed to home prices hitting record levels.
Price wars are breaking out around the country and all-cash offers are commonplace. That is pushing many middle and low-income buyers out of the market.
The First Time Homebuyer Act attempts to address these issues by incentivizing first-time buyers with a tax credit of up to $15,000. The credit was part of President Joe Biden’s original housing plan and will now make the rounds on Capitol Hill.
First-Time Buyers to Get $15,000 Tax Credit
If passed, the legislation will create a refundable tax credit equal to 10% of the home’s purchase price or $15,000. If taxpayers need the credit sooner, they can treat the purchase of the home as if it occurred in the prior year.
Borrowers are only eligible for the tax credit if they have not purchased a home during the past three years. Participants cannot make more than 160% of the area’s median income and the purchase price cannot exceed 110% of the median purchase price for the area. The tax credit is eligible for homes purchased after Dec. 31, 2020, and borrowers are required to use the home as their primary residency.
Housing Reform Is Coming
It is not clear if the First Time Homebuyer Act will be included in President Joe Biden’s infrastructure bill, although Biden has said the bill will address housing infrastructure. It will likely have a greater chance of passing if it does make it into Biden’s infrastructure bill.
The piece of legislation is different from another bill introduced last week by Democrat lawmakers. That legislation helps first-time, first-generation homebuyers with down payments by providing a grant at closing.
Both bills are aimed at addressing the disparities in the housing market, as surging home prices push certain buyers out. It is not clear if either bill will pass, but with President Biden keen on making the housing market more equitable, change could be coming.
Comparing Spotify and Apple’s Podcast Subscription Services
Spotify Follows Apple’s Lead
Spotify (SPOT) is taking a page out of Apple’s (AAPL) book and is launching a podcast subscription service. The move comes a week after Apple unveiled its own subscription model for podcasts.
The new services by the two streaming giants mark a big change for the industry. Podcasts have long been freely accessible online. Charging podcast listeners provides new ways for creators to make money but it is an unproven business model. Apple, Spotify, and other players in the podcast industry will be eager to see how consumers respond to these changes.
Spotify Won’t Take a Cut for Two Years
The new subscription model at Spotify will be powered by the company’s Anchor creator platform. Podcast creators will be able to mark certain episodes or shows as “subscriber only.” They can then charge listeners a monthly subscription fee of $2.99, $4.99, or $7.99.
Spotify will not take a cut of subscription revenue for the first two years of using this business model. Creators will get 100% of their subscriber revenue during that time, excluding payment transaction fees, then Spotify will take a 5% cut of subscription fees starting in 2023. Spotify is launching its subscription service with 12 independent shows and NPR, but the company plans to add more creators over the next few months.
Though Apple is also developing its podcast subscription service, it is taking a different approach. Apple’s new podcast subscription model enables creators to charge $19.99 per year to access premium podcasts. Apple takes a 30% cut of the subscription revenue, which is the same amount it gets from apps in the App Store. Apple’s cut declines to 15% after a year, but this is still higher than what Spotify plans to charge.
Podcasts have grown increasingly popular in recent years, but the podcast market has been tough for companies to monetize. If the subscription model works out for Spotify and Apple, more podcast providers will likely follow suit.