Reforming Retail

Google Is Slowly Becoming King of Online Ordering. But What Will It Really Cost Merchants?

In the hard stand against third party delivery / online ordering, many non-delivery companies are extolling Google as a viable suitor for a merchant’s online ordering needs.

Third party delivery companies gouge merchants.

Third party delivery companies don’t share customer data.

Third party delivery companies will verticalize food manufacturing and replace the restaurants.

Thusly companies from Olo to ChowNow have structured partnerships with Google to syndicate their services on Google web properties. Using Olo for online ordering? For an additional fee you can syndicate your online ordering to Google – think Maps, Assistant, and other Google web presence.

On the surface it makes sense: nobody has a bigger net than Google. But what does it really cost merchants?

The short term costs are easier to measure, even if imprecise today. Usually these are some fixed fee per order, or in the case of ChowNow a fixed percentage of order value. ChowNow recommends that merchants mark up their items by 10% to cover the syndication cost, and we agree it’s a good idea.

Still, we’ve not been able to nail down a clear answer here. And maybe that’s because business models are in flux. For example, is the 10% fee going to Google or ChowNow? (ChowNow wouldn’t comment, so not exactly the best look for transparency). Google bought MAVN, an online ordering company from Austin, a little over a year ago to become Google’s default ordering service. We’ve heard fees range from 0% to 4%. Will these change? According to this article there’s a lot of horse trading but nobody seems to have any specifics.

“Google also gets a 10-percent marketing fee for each transaction involving ChowNow eateries on its platform, a cost that is borne by the restaurants, according to ChowNow’s website. DoorDash, Postmates and other Google partners, by contrast, are sharing a percentage of their commissions with Google, according to several sources with knowledge of the arrangements.”

Then there are the long term costs, and merchants need to be really cognizant of what’s happening here.

Google is a data company. Their job is to sell advertising. Data begets higher quality ROAS (return on ad spend). Becoming the world’s largest online ordering platform affords them many opportunities, some of which work against the merchant.

  1. Google collects customer data on ever order. Is Google passing this data to the merchant? Most likely not. Google is collecting this data and selling it to the highest bidder – and that’s likely never the merchant.
  2. Google collect item level (SKU) sales data. This includes the name of the item, the price at which it sold, and the location where it sold. Once again this data is being sold to the highest bidder, and that’s probably not the merchant

Who might be the highest bidder? Maybe Google’s own investment, ghost kitchen concept Kitchen United. Sure, Kitchen United doesn’t have its own consumer brand today, but who’s to say it won’t verticalize at some point. And if it’s not Kitchen United, maybe it’s someone else – like Amazon’s Whole Food meal kits.

Ignoring syndication on Google properties today might be akin to not eating because your doctor told you you’ll die from heart disease in 20 years. Penny wise, pound foolish. But merchants need to pay attention to the long term implications here. History has shown kings can be both benevolent and malicious. It’s too early to tell how the Google reign will end.

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