Real Examples of Online Ordering Companies Screwing Merchants

15 Nov

Angelo’s House of Pizza is an Italian eatery on the outskirts of Boston. Run by a Greek family, they put in long hours and built a small enterprise on a labor of love. This summer, while the owners returned to Greece to spend time with family, something sketchy happened…

Angelo’s is a customer of Clickawaiter, an online ordering platform that allows restaurants to host their own online ordering on their restaurant website. As opposed to third party demand generation online ordering platforms like Grubhub – which takes large cuts of each order through their system – Clickawaiter charges a relatively small monthly fee for unlimited online ordering. In an effort to capture all potential customers though, Angelo’s also subscribes to Grubhub as well.

While Angelo’s owners were abroad, their restaurant employees noticed that orders stopped originating from Clickawaiter. In other words, online orders were originating from Grubhub as opposed to Angelo’s own website, thus costing Angelo’s substantially more money.

When the owners returned, they phoned their hosting provider GoDaddy and learned their domain had expired. Upon expiration their domain entered a public pool where anyone could buy it. But Angeloshouseofpizza.com is such an obscure domain none of the owners worried someone would happened upon it.

Yet sure enough, in the short time the domain had lapsed it had been claimed. But by whom?

 

Charlies Roast Beef of Middleton has been around for 25 years and Charlie has owned his domain for the last decade. When people sought Charlie’s roast beef in search engines, he would appear at the top of the results. Charlie is likewise a customer of Clickawaiter and his domain, Charliesroastbeefofmiddleton.com, was set to forward over to his online ordering portal hosted by Clickawaiter.

Since making this move, however, Charlie noticed that online ordering sales originating directly from his website have dropped by 80%…

 

When Clickawaiter went to investigate both instances, they found some shocking results.

First, Angelo’s domain was snatched up by a company called Kydia Inc.

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Kydia Inc is the parent company of BeyondMenu, a Grubhub clone in Illinois. When I reached out to Beyond Menu for information I only connected with an outsourced phone representative who had no way to pass me to their public relations team or founder, Leon Chen.

If you visit Angelo’s website today, you’ll notice another peculiarity: it’s now owned by Grubhub. The website footer says as much and the whois registration confirms it. I likewise reached out to Grubhub but have not heard a reply.

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It seems the same ploy was initialized by Grubhub for Charlie’s. Grubhub purchased Charliesroastbeedandpizzeria.net. You can search the registration record or simply look at the website’s footer to find ownership.

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Grubhub used SEO techniques to ensure their .net domain beat out the restaurant’s own domain every time.CLICK TO TWEET

When Charlie asked his customers why they were using Grubhub as opposed to online ordering on his site, his customers said they didn’t know the .net domain was owned by Grubhub; they just assumed because of the high search listing and business name in the URL it was Charlie’s site. Here’s a Google search for Charlie’s roast beef:

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It would appear that online ordering companies are going to whatever lengths necessary to steer more traffic to their online ordering site, where orders cost restaurants substantially more. Online ordering companies claim that using their services help restaurants reach more customers, but then the restaurant can convert those new customers to the restaurant’s own ordering portal.

Instead online ordering companies are acting to the contrary:

They are taking advantage of the merchant’s unsophistication and buying domains to steer all search traffic to their online ordering portal where merchants pay substantially more.

I understand if you want to charge merchants to be ranked higher on your online ordering portal: that’s advertising. But to go off and buy similar domains and then use your SEO juice to steer customers to your portal where the merchant pays more? You can’t be doing that and telling merchants straight-faced that they will be able to turn customers on your portal into customers on theirs.

These online ordering companies sound a lot like Groupon: we’ll gouge you to deliver customers, and then…CLICK TO TWEET

What should merchants do?

It seems that merchants need to start taking a more proactive approach.

  1. Charge more to customers that want to use a third party solution. If Grubhub is going to charge you an additional 15% for each order originating on their portal, pass that cost along to customers.
  2. Have your own online ordering solution on your website. As cloud POS matures, you’ll find that many POS companies will offer online ordering and start syndicating your ordering in places where consumers go: Google, Bing, Yelp, etc.
  3. Do the math! You should learn how many repeat customers are actually now using your online ordering solution. If many customers are using a third party source to find and order from you, you’re going to get upside down on the economics very quickly. How do you do it? You should require email and contact information from people that order on your site. Use an email marketing tool (most are free if you send less than a few thousands emails per month) to ask your customers if they previously ordered from you from another source. You could also ask Grubhub but I doubt they would release such information because it undermines their sales claims.

Don’t be sucked into the foolish math that doomed many of Groupon’s merchants. If you cannot make the numbers work, DO NOT use a third party ordering provider. Would you rather pay for these services only to be out of business in a year?

Be rational, and use data.