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Junk Fees Are Deservedly Getting a Bad Rap. Here’s Why Fees for App-Based Delivery Actually Make Sense.

We get it. After two years of historic levels of inflation, we are all looking for ways to reduce costs—and find culprits to blame for high prices. There are legitimate “junk fee” offenders out there, but a politically-driven rush to paint all industries that assess fees with the same brush is a disservice to the workers, consumers and small businesses that rely on app-based delivery platforms, not to mention the basic facts of what these fees are for and how they are disclosed.

Nowhere is this more apparent than in some policymakers taking misguided aim at app-based delivery platforms’ fees. The headlines from such rhetoric are fleeting, but the negative impacts—on small businesses and consumers, in particular—could be long-lasting.

Every day, app-based delivery platforms help millions of consumers get food, groceries, and other goods quickly and conveniently. These platforms facilitate a logistically complex three-sided marketplace that seamlessly brings together consumers, local merchants, and a network of independent delivery workers.

In three-sided marketplaces like app-based delivery platforms, there are two basic cost components: 1) the price of the goods, generally set by the restaurants, grocers, and other businesses that choose to sell on these platforms and 2) service and delivery fees, set by app-based platforms, go toward running the logistics and services crucial to making on-demand delivery possible—including compensating app-based delivery workers.

These fees are not “junk fees”—they are transparently disclosed to consumers and reflect costs associated with delivering convenience on-demand and at the push of a button. Put another way, you are not paying $22 for a burrito bowl; you are paying $22 for a burrito bowl delivered to your doorstep in 25 minutes by tapping quickly on your phone without leaving your couch.

Three-sided marketplaces offer a variety of benefits:

  • For consumers, who benefit from centralized platforms featuring a plethora of merchants competing for customers.
  • For consumers and merchants, who can reduce their transaction costs and save time via highly efficient matchmaking intermediaries like app-based platforms.
  • For merchants, in particular smaller businesses and mom-and-pop stores, who can leverage app platforms to reach wider audiences at relatively low costs.
  • For delivery workers, who can avail themselves of flexible, independent income-earning opportunities on their own terms.

So, what’s at risk by policymakers’ lumping in app-based delivery with actual “junk fee” bad actors?

For starters, app-based platforms have grown to become solution providers and community partners committed to ensuring everyone has access to the essential services they need to live healthy, productive lives. Our industry is proud to work with local businesses to bring everything from healthy food and groceries to medical prescriptions to consumers’ doorsteps.

These efforts also risk raising consumers’ ire. The use of app-based platforms is both widespread (more than 66% of U.S. adults say they use app-based platforms at least once a month) and highly valued (8/10 parents say app-based platforms are valuable to their daily lives). And policymakers concerned about inflation should recognize that 85% of app-based earners say earning income on these platforms has been helpful in dealing with inflation’s higher costs.

Lastly, there is the potential impact on merchants in communities across the country. App-based platforms generate billions in additional revenue for local businesses, including grocers and restaurants. We’ll be sharing more on the industry’s economic impact later this month.

That’s why it is disappointing that the Biden administration is targeting a deeply competitive industry that has demonstrated its commitment to fee transparency and continues to drive significant economic opportunity for workers and small businesses. 

We welcome an opportunity to discuss this issue with any policymaker. Because well-intentioned efforts to curb actual “junk fees” should not undermine transparent, pro-consumer services and business models, including those offered by app-based delivery platforms.

Date: 03/05/2024
Category: Flex Insights