In-house Vs. Third Party Delivery | RouteSavvy Route Planning Software

In-house Vs Third Party Delivery

How RouteSavvy Lowers Delivery Costs By In-house Staff with Efficient Routing & Delivery Management Functions

 

As a result of the pandemic, consumers have permanently morphed to wanting food and hard goods delivered to their doorstep…which means business owners must decide between in-house vs. third party local home delivery services. According to a 2021 JD Power research study,  71 percent of consumers said they would continue to order home delivery as much or more than they did during the worst of the pandemic.

During the pandemic, a huge percentage of restaurants and other small businesses turned to local home delivery to survive. However, as this business trend kicked in, many small businesses actually LOST money on home deliveries. Between the cost of labor, fuel, inefficient routes that limit business volume, and excessive delivery charges by third-party delivery companies, local home delivery proved to be an expensive survival strategy. Route planning software tools like RouteSavvvy can help lower the cost of delivery – making it feasible for small & medium businesses to cost-effectively deliver their goods themselves.

As of January 2022, 81.9 percent of U.S. restaurants offered home deliveries, with a third of those restaurants using three of more delivery apps such as DoorDash, GrubHub, and Uber Eats, according to FoodMetrics, a foodservice analytics firm.

The fees charged by these home delivery services chipped away at already thin margins for the restaurant & retail industries. As many third-party delivery companies charged between 15-30% of the order value, cities passed emergency laws capping delivery fees at 10-15%. As some of those laws are due to expire, industry groups say that local home delivery will become unaffordable – and that the delivery fee caps should be permanent.

The third-party delivery services have responded to these delivery fee caps by creating and tacking on all sorts of new charges including “local fees.” In Chicago, DoorDash charges customers a $1.50 “Chicago fee.” In Jersey City, NJ, Uber Eats added a $3 “temporary local fee” in response to a delivery fee cap set at 10%.

Another interesting trend is that many third-party delivery companies including DoorDash and UberEats are expanding the list of what they will deliver. In addition to hot meals, these companies now are delivering groceries, pet supplies, alcohol, dry goods, and more.

The high costs associated with using third-party delivery companies for local home deliveries means that small & mid-sized business owners should be seriously looking at handling deliveries in-house instead of using third-party delivery services.

 

Five Ways Third-party Delivery Services Chip Away At Margins & Profitability

There are five ways that delivery services add to the cost of food and hard goods being delivered:

  • Delivery Commission Fees: These platforms charge 15-30 percent of the value of the delivery order.
  • Customer Delivery Fees: Third-party delivery companies also charge a customer delivery fee of $2-$5 per order, collected directly from the customer.
  • Customer “Sur-charges”: Third-party delivery surcharges can be up to 15 percent, in addition to the delivery commission fee.
  • In-app Advertising: The third-party delivery companies charge fees for restaurants & retail businesses that want to advertise on their platform
  • Tips: Tips go directly to drivers, and obviously are paid for by the consumer.

All these fees increase the cost of the food or hard goods being delivered – and they effectively wipe out the razor-thin margins on which restaurants and consumer goods companies are operating. As a result, restaurants and other small businesses deploying local home delivery are being forced to consider whether they can afford to continue local home delivery at all.

Route Planning Software Makes In-house Delivery Services Feasible

Given the financial toll third-party delivery services take, business owners & managers should be looking at handling their own deliveries – with the help of affordable route planning software tools like RouteSavvy. Routing software lowers the cost of local home deliveries & improves revenue. Here’s how:

  • Reduced fuel costs (from more efficient routes)
  • Reduced overtime labor costs (thanks for more efficient routes & less time on the road)
  • Improved productivity & revenue (thanks to being able to shoe-horn more deliveries into a specific window of time
  • Built-in delivery management functions (photo & signature capture functions, notifications to the business and the customer…and more)

Pros & Cons of In-house Vs. Third-party Delivery

 

Third-party Delivery Pros:

  • Delivery logistics are well developed and in place

Third-party Delivery Cons:

  • High costs that eat up thin margins & raise the price of your product

In-house Delivery Pros:

  • Lower cost of delivery overall
  • Lower fuel costs
  • Makes use of existing staff who may not be fully utilized
  • Maintains margins

In-house Delivery Cons:

  • Delivery program must be set up

Route Planning Software Makes An In-house Delivery Program Feasible

 

Route planning software solutions make an in-house delivery program both logistically and financially feasible. When considering in-house vs. third party delivery services, route planning software makes an in-house delivery solution feasible, affordable, and much easier to deploy.

Want to take RouteSavvy for a test drive & learn about its delivery management capabilities? Contact us for a DEMO today.

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