COVID-19 has changed the game for restaurant deliveries

Restaurant deliveries have gone through the roof during COVID-19. What does that mean for eateries, and for ourselves?

 FOOD DELIVERY services offer a new level of simplicity for the customer.  (photo credit: WOLT)
FOOD DELIVERY services offer a new level of simplicity for the customer.
(photo credit: WOLT)

Perhaps some of the most recognizable icons of COVID-19 in Israel are the motorcycles with blue or orange delivery boxes that are everywhere on our streets.

With people stuck inside their homes, sometimes for weeks at a time, demand for restaurant delivery services has skyrocketed during the pandemic. For many, getting a delicious meal from a favorite restaurant became much more than just a way to satisfy a craving. Often, it was a lifeline that kept them sane.

“These sites make it so easy,” says Shimshon Sam Leshinsky, who frequently reviews Jerusalem restaurants on Facebook. “When my daughter in the army was feeling down recently, I sent some food to her, and it really cheered her up. As long as they keep making it easy to send food, this is a field that will keep growing and growing.”

That was a boon for Wolt and 10bis, Israel’s market leaders in the restaurant delivery space. Sometimes, it seems like every other vehicle on the road is branded with either Wolt’s bright blue or 10bis’s striking orange. Their rapid growth, and its impact on the restaurant industry and society at large, may be one of the significant subplots of coronavirus in Israel. 

“Wolt and 10bis have totally changed the restaurant business,” says Alexander Coman of the Coller School of Management at Tel Aviv University. “They were both already popular before coronavirus, but now, they have a lethal formula that has significantly changed consumer behavior. By offering a single address that allows you to order from any restaurant, they have effectively stolen traffic from the restaurants. And this is not going to be undone when COVID is gone.”

IDEALLY, THE driver should arrive at the restaurant as soon as the food is packed, ready to complete the delivery as quickly as possible.  (credit: URI MAGNUS)IDEALLY, THE driver should arrive at the restaurant as soon as the food is packed, ready to complete the delivery as quickly as possible. (credit: URI MAGNUS)

It’s not clear exactly how much the food delivery sector has grown in Israel since March 2020, but judging by reports by other global players, including DoorDash, Grubhub and Deliveroo, sales have grown by several hundred percent, with even more expected in the future. 

These services offer a new level of simplicity for the customer. Instead of choosing where you want to order from, searching for it online, and placing your order, you get a one-stop-shop where you can order from virtually any restaurant in town. Decide you are in the mood for pizza or Chinese, go on the website or app, and order. The site saves the user’s credit card information and dining preferences so that orders can be completed in just a few clicks. Then, you just have to wait for your food to arrive at your door, hopefully while it is still hot.

Wolt and 10bis are the dominant players in the field, handling 51% and 17% of all online restaurant deliveries respectively, according to research firm Shop Analytics. There are a number of smaller niche competitors, including Haat, which serves Palestinian towns. However, both market leaders have built up large and loyal customer bases, with lots of backing from overseas to fund their growth.

10bis (the name being a play on the Hebrew for “give me a bite”) is the veteran Israeli player in the field. Founded in 2000 as a service to enable companies to provide meal plans for their employees, the company quickly became a favorite of the hi-tech scene in Tel Aviv. After being acquired by Dutch online food-delivery company Takeaway.com in 2018 for $158 million, the company now serves hundreds of thousands of customers across the country, works with thousands of restaurants and shops, and has around 2,000 couriers, according to company CEO Tomer Fefer.

Wolt is a Finnish company founded in 2014, now operating in 23 countries and more than 180 cities around the world. The company launched in Tel Aviv and the Center in 2018, and entered Jerusalem in October 2021. The company now operates in more than 35 cities in Israel, with 3,000 businesses, 10,00 couriers and hundreds of thousands of customers, according to Wolt Israel’s Senior Communications Manager Omri Sheinfeld. Wolt was acquired by DoorDash in November for $8.1 billion.

THESE ARE large, expensive and complex businesses. While the websites of 10bis and Wolt are designed to make ordering super-easy, behind the scenes is a complicated logistics operation. Orders are sent to the restaurants to fulfill while a network of drivers is coordinated. Ideally, the driver should arrive at the restaurant as soon as the food is packed, ready to complete the delivery as quickly as possible. Meanwhile, tech support is on hand to handle problems as they arise. That’s not a cheap service to provide. But someone is paying for it.

 HARVEY SANDLER, owner of Harvey’s Smokehouse and Harvey’s Burger Shack in Jerusalem. ‘These companies take a big chunk of your money.’ (credit: Harvey Sandler) HARVEY SANDLER, owner of Harvey’s Smokehouse and Harvey’s Burger Shack in Jerusalem. ‘These companies take a big chunk of your money.’ (credit: Harvey Sandler)

“These companies take a big chunk of your money,” says Harvey Sandler, owner of Harvey’s Smokehouse and Harvey’s Burger Shack in Jerusalem. “Wolt takes 25% of every order, and I’ve heard that others pay 27-30%. When your profit margin is minimal, as they are for most restaurants, basically these orders are just spinning your wheels.”

Not only are restaurants paying more than a quarter of the price of their orders to the delivery services, but in most cases, consumers are also paying an extra NIS 10-18 for the delivery. That means on a NIS 100 order, 10bis and Wolt are bringing in NIS 35 or more. About half of that goes to the couriers. But despite the high costs, most restaurants think it’s worth it.

“The way Wolt sold the service to me was they said ‘you can use us to bring in business during slow times,” Sandler says. When you are busy, like on a Thursday night, you can shut down our service with the tap of a button.’ That is a big benefit for us. With 10bis, we would have to call the company to request it.”

Sandler works with Wolt for burger sales and deliveries, and receives online orders from 10bis. Despite the costs, Sandler is happy with Wolt’s service. “It generates about 40% of the business for the Burger Shack, which is great, especially during these times. And they handle everything once they take the order, including customer service calls. As a marketing channel, it is also valuable for bringing us more exposure to our customers.”

But it’s not perfect for everyone. “Another restaurant owner that I’m friends with was basically doing only 10bis throughout COVID,” Sandler notes. “It allowed him to get through the crisis, but with them taking such a large chunk, its not really a good way to do business. Wolt’s approach for us is more about filling in slow times, and we’ve been successful with that.”

Perhaps certain foods do better than others. Online pizza sales are very profitable, says David Kaplan, founder and CEO of Jerusalem’s Craft Pizza. “We were doing deliveries ourselves during the COVID lockdowns, and it was hard,” he says. It’s a whole different business. Wolt and 10bis take about 25% of our sales, but that’s about the same as it would cost me if we were doing the deliveries ourselves. Wolt in particular is very easy to work with and get paid, while 10bis has a bit more bureaucracy. But they generate about 25-30% of our sales, and we like it a lot.”

Robin Goeta began working with 10bis and Wolt in October for his Cholent Bar, which operates only on Thursday and Friday. “Revenues have increased by about 30%, with Wolt delivering two to three times more customers than 10bis. Cholent has higher margins than many other foods, so it isn’t so expensive to make more. We typically get 50-80 orders a week from these sites.”

Restaurateurs have protested the high prices, and some have even tried launching competing services. There have been a few initiatives by restaurants to try to offer similar services at lower prices, but none has taken off. The convenience of rapid delivery will not come cheap.

HOW MUCH are the delivery people making, anyway? Arranging for deliveries to be made regularly on time might be the most important part of the whole business, and it is probably the trickiest. Most people assume that such delivery jobs pay low salaries, and that job turnover would be constant. However, the people I spoke with painted a very different picture.

“Wolt doesn’t pay by the hour, we pay by the delivery,” Sheinfeld says. “Often you can do three deliveries at once, and make three times as much. In Tel Aviv, drivers make an average of NIS 80 per hour, and often they can make up to NIS 100 per hour. This is a level of pay that wasn’t common for these kinds of jobs in Israel before we started here. That’s why we have so many couriers at a time when there is a shortage of workers, and a waiting list for people who want to be couriers for us as well.”

Wolt pays its drivers as freelancers, with the flexibility to decide when and how often they want to work. “For most of our couriers, it’s not their main income, it’s a supplement to their income,” Sheinfeld says. “Most of our couriers drive less than 20 hours per month. When you check in on the app and say that you are available, you’ll get a notice that this business wants a delivery to this location, and you can decide whether you want to accept it. If you want to make a lot when it’s raining and people are ordering a lot, you can do that. If you want to stay home and drink hot chocolate, that’s okay too.”

10bis, meanwhile, takes a different approach. “Our couriers are company employees who receive a fixed hourly wage and all the accompanying social benefits,” Fefer says. “The hourly rate is NIS 40-50, and with bonuses for peak hours and rainy days, it can be up to NIS 80 NIS per hour. Our couriers also get added benefits such as a 10bis budget and the knowledge that they are being paid for the entire duration of their shift, whether they are delivering orders or not.”

Delivery jobs in Israel have traditionally been minimum wage positions, so the prospect of earning NIS 80 per hour on a flexible schedule is a game-changer for many young people, particularly in the Arab community,

“Yeah, the pay is good here,” says Ahmed, one of several drivers I spoke with while getting food deliveries as I researched this article. “I’m happy with this work.”

A MAJOR part of the restaurant delivery business is the corporate sector, where many companies pay for food deliveries for their workers. 10bis works with thousands of companies all over the country, from large well-known Israeli corporations to small start-ups. The company offers a variety of different payment models, ranging from a monthly expense account for workers to a daily “use it or lose it” allowance. Wolt generally doesn’t work with business clients directly, but it offers deliveries for members of Cibus, a service that manages corporate restaurant accounts for about 3,500 companies here.

For many in the hi-tech sector, a corporate restaurant plan has become a basic perk that employees expect. In fact, Israelis have a better deal here than their counterparts in most countries around the world. In most places, this sort of perk hasn’t caught on.

There are a number of reasons Israel is different in this regard, Fefer says. “Firstly, 10bis founder Tamir Carmel had the insight 20 years ago to revolutionize the field and help make meal allowances part of the [business-to-business] sector. It might also be the result of a mix of Israel’s socialist roots and innovative spirit; as a company with a strong socialist background, companies feel obliged to provide their employees with benefits such as a lunch allowance.”

Taxes are another important part of the story, Fefer notes. “A meal allowance is considered a benefit by the tax authorities, and as such, employees are taxed for their allowance just like they would be for holiday gift vouchers or a company car. In some cases, companies cover the tax cost as well” while saving on their own corporate tax bills. This makes food allowances an attractive perk for everyone.

“It’s similar to the way company cars are taxed here, which makes it a worthwhile option for many,” Coman adds. “And given the fierce competition for tech employees in the market now, companies want to be seen as offering the most generous benefit packages.”

Many workers now consider lunch deliveries an essential part of the work experience. “You see that even in places where food stands are down the block, hi-tech workers still order deliveries,” Coman notes. “Many are working very long hours, and they don’t have the energy to go out to eat.”

Food critic Leshinsky agrees. “Ordering food is an important part of the day at the office,” he says. “It becomes a part of the culture, gives workers something to bond over, and adds excitement to the work routine.”

For some, it also adds something to complain about. 

“I don’t want to be looking a gift horse in the mouth,” says Avi Arya, a hi-tech worker in Jerusalem. “The idea of being able to work until the food comes, instead of taking an hour to go out to a restaurant, is great for everyone. But there are issues. Often deliveries come late, and getting workers to agree on where to order from can sometimes be an ordeal.

“We have to order lunch by 11 a.m. to get the free delivery, and it can be annoying when you miss it. But when it all goes right, it is very convenient.”

When customers complain that their food arrived late or cold, they are often compensated with a replacement meal or a refund, both companies note.

Meanwhile, some wonder if the prevalence of such services is encouraging price inflation at restaurants. If the customer isn’t the one paying for his meal, then is it still worth competing on price?

Food deliveries are probably raising prices, “but I couldn’t say for sure,” says Jerusalem resident Noah Joseph. “I get 10bis from work, and definitely eat more restaurant food as a result. Also, I rarely end up eating from places that aren’t on 10bis. I have spoken to a couple of restaurateurs who’ve said they can’t turn a profit after the chunk that 10bis takes out of the action. And I have definitely noticed delivery fees climbing.”

WHAT ARE people ordering online? That depends. In a list of the most popular dishes revealed by 10bis at the end of 2021, the numbers showed different behaviors at different times of day. At lunchtime, when the vast majority of orders are made from work, salads were the most popular order, followed by schnitzel, hamburger and fries, and sushi poke bowls. At dinner time, burgers were the most popular choice, followed by ice cream, stir-fry dishes and pizza.

“To be honest, I was a bit surprised that so many people order burgers,” notes Burger Shack owner Sandler. “Burgers are one of the worst foods for takeaway. The sauce gets all over the bun, and getting the packaging right is very hard. It’s not like Chinese food where you can put everything in a box. But people are buying it.”

Wolt’s Sheinfeld says his company’s higher service standard makes the difference. “Yes, back in the days when deliveries took 60-90 minutes, burgers would come out bad. But now, when deliveries are made as soon as the food is ready, burgers and fries are some of our top products. Even ice cream, which melts quickly, is easy to deliver if you package it right. There are not many things that can’t be delivered anymore.”

Restaurant reviewer Leshinsky agrees. “When I was in quarantine recently, twice I ordered a steak from a restaurant that is 15 minutes from my home. It arrived hot and delicious, as if it had just come off the grill. I was very impressed.

Leshinsky recalls that when he ordered food for his army daughter, her details were already in the system. “I’m also noticing now that more and more people are using delivery services to send ‘bereavement packages’ with fruits and cakes to shiva houses where families are in mourning. As long as they keep making it easy to send food, this is a field that will keep growing and growing.”

“ONE OF the things we at Wolt are proud of is that the look and feel on our site of a small local vendor is the same as that of a huge chain,” Sheinfeld says. “They get the same delivery service and the same customer support, so it gives the little guys the chance to play in the big leagues even if they don’t have such deep pockets. We give them the tools to enlarge their business.”

That may have some interesting effects on how the market works, TAU’s Coman notes. “We’re seeing the rise of what I call ghost restaurants, where location isn’t an issue. If most of your business is coming from delivery, you don’t need to pay good money for top locations anymore. It’s enough to set up a kitchen in a cheap location. We are seeing more companies succeed by setting up inexpensive operations, while many well-known restaurants with high rent were forced to close during COVID.”

That’s just one of the major shifts happening in the restaurant industry, he notes. 

“It’s incredible that these websites are able to charge restaurants up to 30% of the value of their orders, with about 15% of that going to delivery costs and 15% as profit,” Coman says. “And restaurants are saying, ‘we are doing this nearly for free, but we can’t do anything about it.’”

Coman is fascinated by how rapidly Israelis’ restaurant habits changed. “In the 1980s, the food here was very mediocre. Now, Israelis have to have the newest exciting thing. Trends in sushi, wine, pizza, meat and everything else are changing all the time. We are now a street food mecca. The food arena is extremely competitive. Sometimes, we even see experienced restaurant owners decide to just shut down what they have and come up with a completely new concept, because that’s what the market wants.”

Prices at Israeli restaurants are very high, and they are getting even higher now. Restaurant owners have complained for years that they need to charge high prices to cover their expenses, and many are raising prices as global supply chain issues and inflationary pressures drive up food prices. But many Israelis seem to have no problem spending NIS 40 to NIS 80 or more for a sandwich that they will scarf down at their desks while they work.

There are a number of reasons for that, Coman says. “During the pandemic, a lot of people found themselves locked up inside with nothing to spend money on except food. But beyond that, we have a situation where even people making a lot of money see themselves as poor because they can’t afford to buy an apartment in Israel. They feel like saving up for a home is futile, so they spend their money instead on gadgets and experiences.

“My mother worked very hard in her day, and she would never have paid prices like this at a restaurant,” Coman notes. “Young people seem to believe that these items are a necessity, while I see these prices as outrageous. I notice that when I go into an expensive restaurant that would be considered fancy, a much higher proportion of the clientele is young people than it would have been in the past.”

Furthermore, he says, Israeli consumers are lazy when it comes to personal finances. “You don’t see people in Israel trying to save money the way they do in the US. For instance, people don’t cut coupons. In America, I have friends who are millionaires, and they still bring coupons to the supermarket. It’s part of the culture there. Here, people don’t do that, and they buy brand names at retail prices, which I think is a big mistake.”

The combination of such easygoing customers and the fact that the market is so centralized, with little competition between manufacturers, has created an environment where people are used to paying high prices for dinners at home, he says.

WHAT DOES the future hold for the delivery business? Rapid deliveries of much more than burgers and pizza.

“In March 2020, when the pandemic began, we started doing product deliveries in Israel,” Sheinfeld says. “We started delivering pharmaceutical products and working with the Yellow chain of convenience stores. That business has grown a lot and become a high priority for Wolt. We are now working with 500 retail venues to deliver everything from groceries to flowers, alcohol and toys. Product deliveries now comprise more than 10% of our orders. Our top product in recent weeks is rapid antigen tests, and the next thing will be over-the-counter medicines. There is no reason in 2022 that a person with a cold should have to schlep to the store to buy medicine.” 

Consumer expectations have changed, Sheinfeld says. “The market is in the process of moving from e-commerce to what is known as q-commerce, or quick commerce. People have gotten used to getting food quickly, and now they are starting to expect everything else on demand too. Expectations from the retail sector have gone up, and we provide a high level of service and technology that makes it simple for the user.”

10bis, meanwhile, is focused on technology innovation. “I believe that initiatives like automatic-delivery robots and drones will play a major role in the future,” Fefer says. “In addition, knowing our customers to the point that we know what they want to order before they do, might also be a new standard in the foreseeable future.”

Make some popcorn, or better yet, order some online. This will be interesting to watch. ■