Food delivery apps may soon see even more consolidation
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The food delivery business has been booming as stay-at- home orders keep people inside and restaurant dining rooms closed.
But what was once a big, crowded marketplace of third-party apps offering the service has been shrinking. Caviar merged with DoorDash, there have been regional and international mergers of smaller apps and there are now reports that Uber is looking to buy competitor Grubhub.
That would make the company by far the largest player in a fast-consolidating market.
Consolidation reduces competition, and when competition goes down, businesses can usually charge more, says Alex Susskind, who teaches food and beverage management at Cornell University’s School of Hotel Administration.
“Because they control more of the market, they can dictate the terms in a stronger way,” Susskind said.
That’s not just for consumers, but also for the restaurants that rely on the apps for business, too. Use of third-party delivery services has about doubled as a share of restaurant business since the shutdowns began, says restaurant industry consultant Trevor Boomstra at AlixPartners.
Many restaurants have been complaining about the high fees and commissions the apps charge on already low-margin sales, and Boomstra says consolidation could make things worse.
“What limited negotiating power a lot of the independent restaurants have will be even smaller,” Boomstra said.
But for consumers, he adds, having a few big apps could make the services more widely available. The big apps could also use customer data more efficiently, which could be a good thing or a bad thing depending how you look at it.
COVID-19 Economy FAQs
Which businesses are allowed to reopen right now? And which businesses are actually doing so?
As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.
Will you be able to go on vacation this summer?
There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
You can find answers to more questions here.
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