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New apps take aim at Seamless and Grubhub

Ilya Marritz Apr 30, 2015
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In New York City, a town that loves takeout, apps are replacing the telephone and paper menus as a way to place an order.

The biggest app around is Seamless. That company so dominates online ordering that many restaurants feel they’re forced to do delivery by Seamless rules. But that could be changing, as billions of dollars are invested in new online ordering systems.

Seamless, with its partner Grubhub, handles orders for 30,000 restaurants, from Boston to Chicago to Los Angeles. Abby Hunt, a company spokeswoman, said that fact alone shows the services are providing value.

“Grubhub and Seamless together process more than 200,000 orders a day,” she says. “So we’re able to connect restaurateurs to people who wouldn’t otherwise know that they exist.”

While Seamless really is seamless for customers, restaurants pay a high price for the service through commissions that can go as high as 20 percent on each order.

“The problem is that if it doesn’t translate into more actual revenue or profit for us, then there’s no upside to us” said Lukus Hasenstab, a co-owner of Penelope, an American comfort food spot in Midtown. “We’re just working harder for less.”

For every abstainer, though, there’s a restaurant that sees Seamless as indispensable. When Burger Heights launched in Upper Manhattan last year, it quickly listed with Seamless and GrubHub.

Co-founder Mike Vinocur scanned a spreadsheet of orders on a recent Saturday night, and quickly calculated Seamless and GrubHub’s impact.

“Maybe a third of our business could be through their service,” Vinocur said.

Can’t live with it. Can’t live without it. That’s how much power Seamless has over New York restaurants.

But Seamless only looks invincible, according to Steven Jacobs. He writes about e-commerce for the website Street Fight.

“The reality is these markets are changing extremely quickly,” Jacobs says, “and as companies like Yelp and Google look at the home delivery and food delivery market, the status quo for Seamless right now could change in a matter of a few years.”

Rosenheim Advisors reports $2.4 billion in private capital flowed into food tech and media in 2014, a 42 percent increase from 2013.

This year, Yelp bought the online ordering company, Eat24, and started taking orders directly through its website. Google is taking baby steps in this direction as well, by giving better results when you search food and restaurants.

And there are smaller upstarts doing weird and wacky things, Like Push for Pizza, which had a hit with a web video, advertising pizza that could be ordered with the tap of a single button.

In time, Jacobs says, one or more of these companies will get popular, and offer real competition to Seamless and Grubhub. And that, in turn could bring down the hefty commissions that only a dominant player can demand.

“I think it’s in a way anathema to the very culture of the internet,” Jacobs says.

How will Seamless and Grubhub respond? The company is already thinking about it. Part of the answer may be re-positioning the company as a true friend of restaurants.

“We actually have an in-house restaurant in our Chicago office and our New York office as well that helps put our employees in the shoes of the restaurateurs,” says spokeswoman Abby Hunt.

It’s hard to say what app we’ll be using to procure our pizzas and hot-and-sour-soups, even a year from now. But one thing’s pretty clear: with more people ordering takeout online, restaurants will have to get used to working with the tech middlemen that now stand between them and their customers.

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