Loyalty360 Reads: August 6, 2019

DoorDash is moving into high-end dining by purchasing Caviar, a service “which first launched in San Francisco in 2013, aimed to offer a more …

Programs

Costco Goes Digital

Costco memberships are no longer bound to a plastic card. “Instead of flashing a plastic membership card when entering the wholesale club and at checkout, members can now pull up a digital membership card on the Costco app. The retailer known for selling super-sized products like giant lobster claws and 27-pound tubs of macaroni and cheese has updated its Apple and Android apps to allow members a digital version of the card.”

Customer Experience

Amazon Is Disabling Its Dash Buttons

Dash Buttons, which enabled Prime members to reorder items with the push of a button, will soon be disabled. “Amazon had announced in February it was ceasing sales of the gadgets, but had since then continued to support those already in use.”

DoorDash Buys Food Delivery App Caviar from Square

DoorDash is moving into high-end dining by purchasing Caviar, a service “which first launched in San Francisco in 2013, aimed to offer a more premium experience than other food delivery platforms at the time, such as Grubhub and Seamless. Instead of typical delivery fare such as fast food, pizza, or Chinese, Caviar targeted upscale restaurants that didn’t normally offer delivery.”

Hyatt Relaunches Mobile App for Loyalty Members

The brand has relaunched its app to enhance its customer experience for members. “The new and expanded features allow loyalty members to request items to be sent to guest rooms, to access the schedule of meetings and events happening at the hotel during a member’s stay, to access and stream personal content directly to an in-room TV through Chromecast without the need to enter additional credentials, to unlock guest rooms and public spaces via Hyatt Mobile Entry, and to make requests directly to the hotel and receive feedback in real time via a new chat option.”

Chick-fil-A Named America’s Favorite Fast Food Restaurant

For the first time, the chicken-focused QSR has been recognized as the one American’s are most loyal to. “A recent report by Market Force, published by Food & Wine, polled 7,600 consumers about their satisfaction level with various chains, and Chick-fil-A ranked the highest, with a 79 percent ‘loyalty rating.’”

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Hampden-based Asian eatery TigerStyle closes after barely six months

Area residents could also order from delivery services like Seamless and Doordash—neither of whom allow online ordering for TigerStyle anymore.

The Food Market team opened TigerStyle to the public on February 9, 2019. It occupied a 1,800-square-foot space next to Avenue Kitchen & Bar on W. 36th Street, colloquially known as “The Avenue,” in the Hampden neighborhood. Patrons entered the restaurant through a back alley doorway and could either sit at a communal table, surrounded by hip hop ephemera, or take food out. Area residents could also order from delivery services like Seamless and Doordash—neither of whom allow online ordering for TigerStyle anymore.

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Grubhub CEO Calls Out Delivery Rivals For Price Gouging; Stock Drops 14% On Earnings

Grubhub CEO Matt Maloney, on the heels of a lukewarm earnings report that pummeled the company’s stock, criticized rivals DoorDash and …
APTOPIX Wall Street GrubHub IPO

GrubHub Inc. CEO Matthew Maloney at the New York Stock Exchange.

ASSOCIATED PRESS

Grubhub CEO Matt Maloney, on the heels of a lukewarm earnings report that pummeled the company’s stock, criticized rivals DoorDash and Postmates for high service fees, extra costs hidden in menu markups and subscription programs he described as “bogus.”

“The problem is by egregiously price-gouging consumers, at some point, they will figure it out,” he told Forbes. “I trust the consumer, ultimately.”

In particular, he took issue with the service fees other competitors charge at the end of an order that drive up the price in addition to delivery fees. For example, a recent $30 dumpling order on UberEats had a $5.99 delivery fee tacked on, plus another $4.60 service fee and $2.68 in taxes, bringing the total bill to over $45 with tip. Grubhub, by comparison, doesn’t charge a service fee.

For now, customers seem to swallow the service fees in favor of the “novelty” of delivery, Maloney contends, but he argues that is likely to change when customers “wisen up” to the difference in cost structures between companies. Often, menu items vary in price between platforms depending on whether the company has a partnership with the restaurant. In a report released Tuesday by D. A. Davidson, which recommended buying Grubhub shares, the firm concluded that Grubhub and Seamless offered the lowest prices inclusive of delivery and service fees, but their food prices were on average listed higher than those on DoorDash and Postmates. (DoorDash declined to comment on Maloney’s remarks, Postmates did not respond to request for comment.)

Maloney’s charges followed a tepid quarter for the food delivery company, which reported a 96% dive in net income year-over-year to $1.3 million as its operating expenses and marketing costs ballooned. Revenue for the three months ending in June increased 36% year-over-year to $325.1 million, beating the FactSet consensus estimate of nearly $318 million. Grubhub, which went public in 2014, also lowered the top end of its full year revenue forecast, to a range of $1.34 billion and $1.39 billion.

Despite growing competition from companies like DoorDash, Grubhub increased its active diners 30% year-over-year to 20.3 million and clocked $1.5 billion in gross food sales.

The results disappointed investors. Shares fell as much as 14% after the earnings report, erasing the gains the stock had made on Monday following the news that Amsterdam-based Takeaway.com agreed to acquire U.K. competitor Just Eats for $10 billion.

When asked about potential M&A in a conference call with analysts and journalists, Maloney said he wasn’t thinking about any mergers or acquisitions specifically for his company.

“There are a lot of players right now making a lot of poor business decisions, and I think there’s a lot of money and likely a lot of investors who are concerned about their own liquidity,” he said. “I think the conditions are favorable for consolidation, but how it plays out are hard to tell.”

Maloney: Rivals Hide Menu Markups

One business decision Maloney particularly harped on was the increase in service fees and menu markups among the competition, which he compared to the “Wild West” of travel where objective price wasn’t well-known.

“Diners are often paying 30% to 40% of a bill in fees and markups when they order from the competition, and that’s not right. And we’re going to start calling out others who charge much higher fees even when they promise free delivery,” Maloney told Forbes after the call.

While Maloney may criticize the competition for misleading consumers, his company came under fire in May for allegedly doing the same thing to restaurant owners. The New York Post had reported in May that the company had created thousands of websites for restaurants on its platform, some of which featured different pricing than the restaurant’s menu. Grubhub also faces a lawsuit over charging for phone calls that didn’t result in an order for the restaurant.

On Tuesday, Maloney defended Grubhub’s business model, saying it helps restaurants build an online presence and receive more orders. He also said the company has been complying with all government inquiries into the model, including a New York City Council hearing. “We believe we are fairly charging restaurants,” he said on the call.

When asked about the claims again by Forbes, Maloney pushed back strongly: “This is all bullshit, to be totally clear. I’m not sure what the instigation of these accusations are, but none of them are true,” he said.

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Grubhub cuts revenue outlook as competition grows

The company is facing rising competition from rivals, particularly DoorDash Inc. That company has struck restaurant deals and raised billions of dollars …

People are ordering more meals from Grubhub Inc., but strong profits remain elusive.

Grubhub on Tuesday reported lower profit and cut its revenue expectations for this year as it spends more to acquire new diners amid mounting competition among food-delivery companies.

The company is facing rising competition from rivals, particularly DoorDash Inc. That company has struck restaurant deals and raised billions of dollars in investment recently, fueling a rapid expansion across much of the U.S.

Grubhub said orders were up and diners bought more frequently during the quarter ended in June. Executives said they are working to improve efficiency, but also pushing into smaller, less dense markets that tend to be more expensive to serve.

Grubhub’s shares were down 9% in early afternoon trading Tuesday.

The Chicago-based company notched earnings of 27 cents a share on an adjusted basis in the quarter, a 46% decline from last year’s period. Revenue was up 36% from last year to $325 million.

Analysts polled by FactSet had anticipated adjusted earnings of 30 cents a share and sales of $318 million. Grubhub executives said delivery tends to be slower this time of year as colleges wind down and better weather diminishes demand for to-go food.

DoorDash’s recent restaurant partnerships include a pilot with McDonald’s Corp. in Houston. Uber Eats, the food-delivery arm of Uber Technologies Inc., said last week it will deliver from Starbucks Corp. locations across the U.S. by the end of the year, and said Tuesday that it had struck a deal with White Castle System Inc. to shuttle sliders from more than 330 locations.

Grubhub executives said their rivals have grown rapidly in part by obscuring their service fees from customers. DoorDash and other services have spent heavily on free delivery and promotions to help nab business and launch diner subscription programs.

“We see a lot of activity that’s being funded by late-stage [venture capital] money,” Grubhub Chief Executive Matt Maloney said in an interview.

As competition increases, restaurants are asking for more from food-delivery services, including rate reductions and easier integration into their operations. Grubhub has had to boost its advertising and promotional spending to compete.

Food-delivery companies are also navigating increasing regulatory scrutiny. Grubhub has faced questions over its policies for collecting fees from restaurants, particularly independent ones that drive the bulk of its business.

“The characterization that we are intentionally misleading or manipulating restaurants at their expense is patently false,” Mr. Maloney said.

DoorDash last week changed its policy for tipping drivers. Mr. Maloney said that all customer tips go to drivers and that Grubhub is looking at new ways to attract workers as competition for gig workers heats up.

“We want drivers to feel like they are paid as fairly as possible,” he said.

Grubhub slightly lowered the top end of its forecasts for both revenue and a key profit metric, earnings before interest, taxes, depreciation and amortization, following adjustments, for 2019.

It now expects between $1.34 billion and $1.39 billion in revenue for the year, as well as $235 million to $250 million in Ebitda.

Write to Heather Haddon at heather.haddon@wsj.com

High-tech food delivery aims to connect US restaurants, diners

Palo Alto, California-based DoorDash, Berkeley, California-based SpoonRocket and Chicago-based GrubHub Seamless each offer a different …

Fledgling food-delivery startups using new communications technologies are changing the dining experience for some diners.

Palo Alto, California-based DoorDash, Berkeley, California-based SpoonRocket and Chicago-based GrubHub Seamless each offer a different approach to delivering food fast and at reasonable prices.

“People are just very busy these days, so this is a way for people who don’t have time to go out to dinner, or pick up their meals, to get great meals delivered to them,” said Tony Xu, chief executive officer and co-founder of DoorDash. “For people who don’t want to leave the house for an hour or two, they let us do the work. When people order through us, it’s as if they are at the restaurant already, placing an order.”

A customer using DoorDash goes to its website and picks from a group of restaurants. Then the consumer selects a meal and places the order with DoorDash, which transmits the order to an iPad perched in the restaurant’s kitchen. The restaurant prepares the meal, and a DoorDash delivery person arrives to pick it up. Average time: 44 minutes from order to delivery.

Xu said DoorDash uses algorithms powered by the company’s proprietary software to figure out which driver is best-located to pick up a meal and deliver it. DoorDash delivers in Palo Alto and neighbouring cities.

DoorDash founders Andy Fang, from left, Stanley Tang, Tony Xu and Evan Moore pose for portrait in their office, August 21, 2013, in Palo Alto, California. (Nhat V. Meyer/Bay Area News Group)

(l-r) DoorDash founders Andy Fang, Stanley Tang, Xu and Evan Moore pose for portrait in their office in Palo Alto, California.

Diners pay DoorDash the cost of the meal plus a US$6 (RM25) delivery fee for orders of US$100 (RM412) or less. For orders that exceed US$100 (RM412), the delivery fee is US$12 (RM50).

SpoonRocket provides a much different service. It prepares its own food and charges US$6 (RM25) per meal, including delivery. Customers are offered two choices each day, one meat dish and one vegetarian dish. SpoonRocket delivers in Berkeley and Emeryville.

“We think this is revolutionary,” said Anson Tsui, co-founder and chief happiness officer with SpoonRocket. “Never before have you been able to get a meal consistently delivered within 10 minutes.”

SpoonRocket keeps costs down by limiting the choices to offering only two dishes each day, but the dishes change daily, so customers can sample a variety over weeks or months. The company hired executive chef David Cramer, who led restaurants in Napa and Yountville, California.

Both DoorDash and SpoonRocket are challengers in a niche dominated by GrubHub Seamless.

GrubHub’s website offers customers a list of restaurants in their vicinity that offer delivery services. The restaurants pay a 10% fee from each order to be listed on the GrubHub website. Restaurants that wish to be listed more prominently pay an additional fee to the online service. The customer pays the restaurant for the food.

“The availability of mobile computing and mobile apps and smartphones are really driving all of this,” said Allie Mack, a spokeswoman for GrubHub. “The new technologies are making these kinds of services really convenient.”

DoorDash driver Jake Vertin shows off the upcoming iPhone application in Curry Up Now, August 21, 2013, in Palo Alto, California. (Nhat V. Meyer/Bay Area News Group)

A DoorDash driver shows off the upcoming iPhone application in Curry Up Now in Palo Alto, California.

Several restaurants that use the new delivery services touted them as a way to drive more customers to buy their meals. Another appeal for restaurants is that the services free them of the cost of having a delivery driver on staff.

“It would cost us a lot to hire somebody to deliver,” said Mary Minoo Sadri, a co-owner of Vaso Azzurro Ristorante in Mountain View, California. “DoorDash leaves ample time for ordering. They always are on time.”

Mistie Cohen, a partner with Oren’s Hummus Shop, a Palo Alto restaurant, said when they began working with DoorDash a few months ago, the delivery service provided the restaurant with about US$40 (RM165) a week in revenue. Soon after, the revenue was up to US$500 (RM2,060) a week. “The last time I checked, we were getting US$2,800 (RM11,539) to US$3,000 (RM12,363) a week from DoorDash,” Cohen said.

DoorDash said it started out in mid-June with about 12 restaurants. Now it’s up to more than 50 restaurants, has made about 3,800 deliveries, and is generating revenue that works out to US$1.5mil (RM6.18mil) a year.

“We’re planning to expand further in the Bay Area,” Xu said. “There is a lot of interest from customers from San Francisco to San Jose, from all over the Bay Area.”

SpoonRocket also is planning to expand beyond its current Berkeley and Emeryville, California, territory. The company will need to find new facilities first and make sure its present business model has a solid foundation, Tsui said.

“There is clearly demand for this,” Xu said. “It is an underserved market.” – The Oakland Tribune/Tribune News Service

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