Contributing editor, Peter Backman, is a long-term foodservice sector guru and founder of theDelivery.World, a platform that connects the delivery sector and makes sense of the myriad changes and challenges that affect the sector across the globe.
Grab’s latest annual report says the company’s growth depends in part on its ability to reduce incentives paid to driver-partners. The word is “reduce,” not “manage.” The same wording has appeared in every annual filing since Grab went public in late 2021.
It has not worked out that way. In the third quarter of last year, Grab’s partner incentives rose 40 percent year over year, from $187 million to $263 million, while the value of transactions on the platform grew 24 percent. The incentives figure includes both merchant partners and drivers, so it is not a clean measure of courier costs. Even so, the delivery network is getting more expensive faster than growth in the business it supports.
Every platform runs into this. One answer is to cut the cost of each delivery without cutting the courier’s hourly earnings. Reduce wait times for orders, combine two drop-offs in the same neighborhood and predict when the kitchen will actually have the food ready. Do these things, and the same person can earn more while each order costs less. DoorDash makes this distinction in its own December 2025 filing, stating that the economics depend on both courier efficiency and courier pay. They are not the same thing.
Meituan has taken this further than any other major platform. It handled a peak of more than 120 million orders in a single day in July last year, inflated by a subsidy war with Alibaba and JD.com, with an average delivery time of 34 minutes across all orders, using a network of around seven million riders. At that scale, it operates as much like a logistics network as a marketplace, with millions of movements managed minute by minute.
For a decade, the outcome was what you would expect: faster deliveries, more orders per rider and a lower cost per order.
Last year’s results suggest it is approaching the limits of what efficiency alone can do. Adjusted net profit in the second quarter fell 89 percent from a year earlier, and operating profit in core local commerce dropped 76 percent. The company cited higher courier incentives alongside consumer subsidies, grocery expansion and overseas investment, so labor was only part of the story. But the platform with the largest delivery network in the world is now spending more on riders, not less, while fighting a price war with JD.com and Alibaba.
Meituan also made two changes last year that do not appear in its accounts.
It said it would scrap penalties for late delivery by the end of the year, and it has been running fatigue-prevention programs for riders. Both adjustments followed sustained public pressure over working conditions, and both remove levers the dispatch system relied on. Late penalties encouraged riders to go faster. Hour limits restrict how long they can stay on the road. The technology will keep improving, but within tighter social constraints, and pressure applied directly to riders is no longer free.
New York City is one place where this has been properly measured. The city imposed a minimum pay rate on delivery apps in late 2023. Courier earnings rose 64 percent, from $11.72 to $19.26 an hour after tips. Time spent waiting for an order fell 39 percent, while time spent actively delivering rose 15 percent. The customer paid 76 cents more per order, taking the average to $39.11—an increase of about 2 percent.
What I take from NYC is not that minimum-pay rules turned out to be cheap; they were not. Most of the cost was absorbed through productivity gains, as couriers spent less time waiting and more time delivering.
Seattle set a higher floor in early 2024, and the outcome was very different. The apps added a $5 customer fee, and DoorDash reported 30,000 fewer orders in the first two weeks, with couriers waiting three times longer between jobs. Order density is probably a large part of the explanation, though the higher fee and the differences between the two sets of rules matter too. Combining orders needs enough of them at roughly the same time and within a short distance.
Manhattan has that density; so do Jakarta, Seoul, Bangkok and Shanghai. Large parts of suburban America do not, and neither do most emerging markets outside their biggest cities. Where density is low, there is far less scope to spread higher hourly pay across more deliveries.
Restaurants pay part of the cost of that productivity, particularly where it comes from batching several orders into one trip. A mystery-shopping study of 600 US delivery orders between April and June of last year found that 15 percent of third-party orders arrived after the courier completed another delivery first: 24 percent of Uber Eats orders, 9 percent of DoorDash orders and 12 percent of Grubhub orders. Those deliveries took about 8 minutes longer, and customers rated the food lower upon arrival.
Customers may not know the courier stopped somewhere else. They know the food was cold, and the restaurant takes the blame. Uber Eats is now facing a complaint in California alleging that its paid priority option can still involve other stops even though it is sold as direct delivery. The allegations are unproven, and the case has not been certified. But Uber Eats offers an option to avoid extra stops, which suggests some customers think extra stops are worth avoiding.
The easy gains are running out. Better dispatch and sensible batching will still cut wasted time, but neither can indefinitely offset higher pay, tighter regulation and new limits on how riders work. Courier costs rose last year in China, Southeast Asia and the US, and two of the tools used in China are being withdrawn in response to social concerns. DoorDash’s first-quarter guidance identifies higher courier costs as a pressure on profitability.
If courier costs keep rising faster than order values, platforms have few places to recover the difference. They can charge customers more, raise commissions, lean more heavily on advertising and paid placements or take it out of their own margins. My guess is that most will do some of each, and that the split will vary by market.
Either way, restaurant operators should not assume the rider-pay debate is something for someone else to worry about.
