Summary of the News
This article accurately identifies the common struggle faced by millions of domestic food delivery businesses: in the past, delivery was seen as a secondary source of revenue for offline restaurants. However, after several years, it became clear that the more orders they received, the less money they actually kept. After deducting platform fees, promotional subsidies, and marketing expenses, most of the profits went to the platforms. Many businesses found that their year's worth of effort was essentially working for free for the platforms, with the situation worsening as they sold more but lost more money. Now, they are caught in a dilemma where they can't make a profit from delivery and can't survive without it. It's not that businesses don't want to continue with delivery; it's simply that their financial accounts are no longer balanced.
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Detailed Analysis
1. Working for the platform is no exaggeration; let me show you the real numbers for a single delivery order
Many people think that the phrase "working for the platform" is just a way for businesses to complain about their poor financial situation. But take the common dish, braised chicken, as an example. If you sell it in-person for 20 yuan, with ingredient costs of 6 yuan and additional expenses for rent and utilities of 2 yuan, you make a net profit of 12 yuan per order, which is quite profitable.
However, when you sell it through a delivery platform, the situation reverses. The platform first takes around 23% as a service fee, which is 4.6 yuan. To avoid being overshadowed by the platform's customer base, you have to participate in its promotional activities, such as setting the price at 25 yuan with a discount of 10 yuan. The customer pays 15 yuan, and you also have to cover 3 yuan for delivery and 1 yuan for packaging. After all these deductions, you only make 6.4 yuan. Subtracting the 6 yuan for ingredients, you earn a mere 0.4 yuan per order. If you spend 50 yuan on platform advertising to boost your rankings and end up serving 100 orders, you could even lose 10 yuan. In other words, you're essentially working for free for the platform.
2. The imbalance in financial accounts isn't because businesses don't know how to run a business; the costs of delivery have changed quietly
When delivery first became popular, platforms offered low fees (around 5%) or even gave subsidies to attract businesses and customers. Back then, it was easy to make a profit, and many small owners used delivery to open several branches.
But now, platforms have long since stopped the costly phase of market expansion. The billions invested in the early days need to be recouped. Delivery platform fees have generally risen to 20%-28%, and there are many additional hidden costs. To attract customers, you have to pay for advertising, similar to paying a fee to have people pass by your physical store. Platforms often organize promotional events that require businesses to participate in discounts and give out red envelopes, with 90% of these costs falling on the businesses. With multiple layers of expenses, businesses' profits are significantly reduced, making it difficult to keep their accounts in the black.
3. Even though businesses know they're losing money, they can't just close down their delivery services
Many outsiders suggest simply stopping if they don't see a profit, but the reality is more complex. Consumers in China have been accustomed to using delivery services for over seven years, and more than half of them order food via their phones first. If a business closes its delivery service, not only will they lose new customers, but existing customers will switch to competitors. Their in-person business will also suffer, potentially leading to an inability to pay rent.
Businesses are essentially trapped on the platform's terms: if they stay, most of their profits go to the platform, and if they try to operate independently, they might go bankrupt quickly. With no other options, they have to continue struggling.
4. Delivery businesses no longer focus on increasing orders; they're trying to survive with minimal losses
Smart businesses have stopped chasing high order volumes. The industry has found ways to avoid losses. One strategy is to limit orders to 30 per day, just enough to cover daily expenses. Any additional orders are treated as closed, which saves on hiring and extra ingredients and reduces losses. Another strategy is to minimize costs by renting a delivery location without an in-person dining area, which is 70% cheaper than street-front stores, thus squeezing every last penny of profit. A third strategy is to build their own customer base through social media, delivering orders directly via WeChat, avoiding platform fees and earning twice as much per order. This way, they can gradually divert traffic from the platforms to their own systems.