Dec. 20, 2020 9:00 am ET
On the Caviar food-delivery app for San Francisco, a double ShackBurger from Shake Shack SHAK -0.85% is listed at $8.99, the same price it costs in-store. Yet by the time it reaches your door, it costs $18.91. Here’s the breakdown of nearly $10 in added charges:
- Tax: $.76
- Delivery fee: $1.99
- Recommended tip: $3
- Small-order fee: $3
- Service fee: $1.17
During the pandemic, people have been willing to pay the delivery upcharge as a way to exercise caution while procuring meals and groceries. Following the first round of shelter-in-place orders, suburbs drove the first profitable quarter for DoorDash Inc., DASH 7.87% which owns Caviar. In April, Instacart Inc. experienced a 500% year-over-year increase in grocery orders. The company’s contractor shoppers became front-line workers overnight.
As states renew restrictions on indoor dining and extend stay-at-home orders across the country, delivery is top of mind once again. But consumers are growing wary of the inflated cost of delivery, and companies are offering users better deals, in exchange for loyalty. What is the best way to save money? Pay attention to the details.
Fees aren’t the only source of extra costs. The prices of individual items can be padded too. Costco, for instance, doesn’t require its Instacart grocery-delivery customers to hold a $60-a-year membership the way in-store shoppers must, but it does charge higher prices on Instacart than in its warehouse, on top of surcharges.
Rags Srinivasan, a pricing consultant, recently determined the markup of his Instacart Costco order when a shopper mistakenly sent him the original in-store receipt. The Instacart order ended up about $20 higher. “It’s convenience inflation, and it’s happening largely without people realizing it,” said Mr. Srinivasan.
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Cost of Convenience
Comparing the price of groceries bought at a Costco in Mountain View, Calif., with what Instacart charged the customer who ordered them shows a hidden markup, in addition to delivery fees.
Prices before delivery fees and taxes
Cost of Convenience
Comparing the price of groceries bought at a Costco in Mountain View, Calif., with what Instacart charged the customer who ordered them shows a hidden markup, in addition to delivery fees.
Prices before delivery fees and taxes
Costco price
Charmin toilet paper
30 ct.
$27.49
total
Bounty paper towels
12 ct.
Apricots
3 lb.
Kirkland Strawberries
4 lb.
Thai Kitchen coconut milk
6 x 13.66 fl. oz.
Oreo cookies
52.5 oz.
Cauliflower
2 lbs.
Green beans
2 lbs.
Kirkland tortilla chips
40 oz.
Bananas
3 lbs.
Costco price
Charmin toilet paper
30 ct.
$27.49
total
Bounty paper towels
12 ct.
Apricots
3 lb.
Kirkland Strawberries
4 lb.
Thai Kitchen coconut milk
6 x 13.66 fl. oz.
Oreo cookies
52.5 oz.
Cauliflower
2 lbs.
Green beans
2 lbs.
Kirkland tortilla chips
40 oz.
Bananas
3 lbs.
Costco price
Charmin toilet paper
30 ct.
$27.49
total
Bounty paper towels
12 ct.
Apricots
3 lb.
Kirkland Strawberries
4 lb.
Thai Kitchen coconut milk
6 x 13.66 fl. oz.
Oreo cookies
52.5 oz.
Cauliflower
2 lbs.
Green beans
2 lbs.
Kirkland tortilla chips
40 oz.
Bananas
3 lbs.
Costco price
Charmin toilet
paper, 30 ct.
$27.49
total
Bounty paper
towels, 12 ct.
Apricots,
3 lb.
Kirkland
strawberries, 4 lb.
Thai Kitchen
coconut milk,
6 x 13.66 fl. oz.
Oreo cookies,
52.5 oz.
Cauliflower,
2 lbs.
Green beans
2 lbs.
Kirkland
tortilla chips,
40 oz.
Bananas,
3 lbs.
An Instacart spokeswoman said retailers set their own prices on the platform, and the company notifies customers in the app whether prices are the same or higher than in-store. She noted that Costco members can enter their membership number into Instacart to unlock members-only savings. A Costco spokeswoman declined to provide comment.
Rafi Mohammed, the author of “The Art of Pricing,” found the same is true for some restaurants on delivery apps. A Boston-based Italian restaurant, T Anthony’s, sells a large meat-lovers’ pizza for $19.20. On Uber Eats, the same pie costs $23.90. Prices on DoorDash and Grubhub are lower but still elevated.
The difference helps cover Uber’s 30% commission, said Joe Rastellini, the restaurant’s owner. “Before, I just had my own drivers and Grubhub. Then, because of the pandemic, I ended up adding new services, and when you sign up with them you’ve got to play ball.”
Mr. Rastellini added that his restaurant’s website offers local delivery without any additional fees, aside from tip and taxes.
For many, a delivery app’s variety and convenience are worth the extra cost. Still, you might find savings by contacting your favorite restaurants directly.
Mr. Mohammed expects the price of delivery will go down after the pandemic. “Instead of going to the movies or the ballpark, we’ve been spending that money on ordering in,” he said. “Post-vaccine, people will want to dine out, and that will decrease demand for delivery.”
That cost is already going down for some through subscription plans. You pay a set amount monthly or annually in exchange for reduced per-order costs (and sometimes faster service). Are they worth it? Only if you order frequently enough. Here’s how subscription plans for the most popular meal and grocery delivery services work:
Instacart Express
Price: $9.99 a month; $99 a year
Worth-it monthly minimum: Three orders
Nonmember delivery fee: $3.99
Instacart’s membership waives delivery fees for carts of $35 or more. Benefits also include free one-hour pickup and a reduced service fee (1.9% instead of the nonmember 5%). The service isn’t limited to groceries, either: Retailers including Best Buy and CVS are on the app as well.
Instacart will shop for you at grocery stores, Best Buy and CVS.
Photo: Michael Loccisano/Getty Images
Walmart +
Price: $12.95 a month; $98 a year
Worth-it monthly minimum: Two orders
Nonmember delivery fee: $7.95
Walmart’s new program is a rebranded version of the now-defunct Delivery Unlimited membership, which offered no-fee delivery from local stores. With Walmart+, you can order same-day groceries from participating local stores between 7 a.m. and 8 p.m.—and next-day knickknacks from Walmart.com—without extra fees.
Free grocery delivery requires a $35 minimum cart. Orders from Walmart.com don’t, but only items “shipped by Walmart” qualify. Subscribers also save 5 cents a gallon on fuel at Walmart locations and gain the ability to scan and purchase in-store items from their phones—saving a trip to the checkout lane.
Shipt
Price: $99 a year
Worth-it monthly minimum: One order
Nonmember delivery fee: $10
Shipt previously required an annual membership to get same-day delivery from retailers like Target, Petco, CVS and Costco—plus many local grocery stores. Now the service, which is owned by Target, offers one-time passes for $10. But if you order from Shipt at least once a month, the subscription is worth it. Orders under $35 still incur a $7 delivery fee.
Amazon Prime Now
Price (included in Prime subscription): $12.99 a month; $119 a year
Worth-it monthly minimum: Depends on your use of Prime
Nonmember delivery fee: N/A
The same-day delivery program from Whole Foods, Amazon and Pet Food Express is available exclusively to Amazon Prime members in select cities. Orders under $35 come with a $4.99 delivery fee. The Prime subscription also offers fast, no-fee shipping from Amazon.com and a large library of streaming media, including movies and music.
A driver prepares to make deliveries in Dublin, Calif.
Photo: shannon stapleton/Reuters
DoorDash/Caviar DashPass
Price: $9.99 a month
Worth-it monthly minimum: Three orders
Nonmember delivery fee: $1.99 to $3.99
The meal-delivery subscription waives delivery fees and reduces service fees (17% for nonmembers) across DoorDash and Caviar. The order must be at least $12, and it only works with participating DashPass restaurants. (Chipotle, yes; Panera, no.) While DoorDash is known for offering meal delivery from nationwide chains, the service added retailers such as Walgreens and CVS earlier this year.
Uber Eats Eats Pass
Price: $9.99 a month
Worth-it monthly minimum: Three orders
Nonmember delivery fee: Up to $3.99
SHARE YOUR THOUGHTS
What food-delivery apps do you use? How has the experience been? Join the conversation below.
At eligible restaurants, you get a waived delivery fee and 5% off orders that meet the $15 minimum.
There is another way to get free delivery from Uber Eats, but it isn’t guaranteed: If someone near you ordered food, you can sometimes opt for the same restaurant and the delivery fee is dropped. Think of it as an UberPool, but for your dinner.
Grubhub+
Price: $9.99 a month
Worth-it monthly minimum: Three orders
Nonmember delivery fee: Up to $3.99
Earlier this year, Grubhub launched this program with 100,000 participating restaurants across the U.S. Subscribers receive no-fee delivery on orders of $12 or more, and a free meal for pickup ($10 or less) every month. They also get access to elite customer service. The company is offering a two-week free trial of the service.
Grubhub delivers in midtown Manhattan.
Photo: mike segar/Reuters
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