In the past, we’ve written a lot about the relationships between restaurants and their customers, customers and delivery platforms, and delivery platforms and restaurants. But one relationship in the game that we’ve yet to address is that between delivery drivers and the customers they deliver to. Namely, the issue of the tip.
This week, we set out to do just that, analyzing the order delivery data from New York City’s highest earning industries to give you the lowdown on the city’s thriftiest tippers.
It’s common knowledge that New York City is a leading center of finance in the world economy — financial services account for more than 35 percent of the city’s employment income. Average compensation is the industry is $388,000 per year—five times higher than the average New Yorker’s salary in the private sector. New York also has the highest concentration of jobs in the legal profession, only behind California, with lawyers in the empire state earning an average yearly income of $165,260.
Investment bankers love food delivery just as much as the next person. The ease of giving your order the team member in charge of lunch orders and having hot food being delivered to your office desk can’t be beat. But is the delivery person who endures traffic, adverse weather conditions, and the MTA all day getting fairly compensated for your convenience?
- The average salary of someone in finance is $388,000. According to the Bureau of Labor Statistics on the other hand, food delivery or sales workers earn an average of $28,090 per year, with most deliverers working seven days a week.
- The national average delivery tip on Seamless is 13.9 percent per order, with New Yorkers falling below average at 13.1 percent.
And as we found, employees at New York’s biggest banks and law firms fare even lower.
Let’s set up some context.
Our initial hypothesis was that companies in finance would be hefty tippers, or at least, they have the means to be hefty tippers. A similar level of gratuity was expected from the other industries — Legal Services, Venture Capital, and Software. We expected there to be some data points showing 0% tip, to which we attributed tips paid in cash. We also expected those who place frequent orders to tip less on average, justifying their low tip with their order frequency.
Tipping etiquette can be the source of hot debate. Most people who’ve worked in the service industry say tipping is always mandatory and a 20 percent tip should be the standard. But when to tip and how much can often be a source of confusion for customers, especially now in the age of on-demand delivery.
The Emily Post Institute recommends a pre-tax tip of 15-20% — and this is pretty much the standard across other sources as well.
The confusion and remiss may be attributed to the fact that apps like Seamless and GrubHub charge a delivery fee. As a way to offset the high commissions that third-party delivery services take on each restaurant order, restaurant owners often put in place an additional charge for orders placed through an app. These delivery fees rarely, if ever go to drivers, and should not be considered a substitute for tip.
The other confusion could be around whether tip is mandatory. Seamless and other apps don’t make users pay a tip. Instead, they offer suggested gratuities on their checkout page, but Seamless’ website recommends that delivery people get paid between 10% – 20% of the order total. The site’s order page even has a default tip amount of 15%.
In summary, this is what we know:
- There’s certainly confusion about order delivery tip vs. order delivery fee (why do I have to pay twice?)
- There’s definitely ambiguity around who it goes to (the third-party app, the restaurant, or the deliverer?)
- There’s also a bit of psychology involved (if the delivery guy who orders my food is also delivering 5 other orders of food to my company, does that justify giving a lower tip, since I know others are going to tip him too? Cue an Econ lesson in free-riders)
What did we find?
Here’s what we found.
We dove into the last three months of order delivery data from a dozen of the restaurants we work with. We made sure our sample accurately represented the distribution of New York City restaurants on delivery platforms, offering everything from fast food to fine dining, catering to a diverse clientele, and serving multiple corporate accounts through Seamless.
We looked at the data from 383 distinct companies in the Finance, Legal, VC, Software, Consulting, and Consumer Goods industries who all hold corporate accounts at these restaurants.
- 2.3 percent of diners gave no tip.
- What it means: Let’s be optimistic and say these customers gave a tip in cash.
- 13.33 percent of customers tipped a positive amount less than 8%
- What it means: Confusion around how much to tip, dissatisfaction with delivery service, general disregard for the delivery worker.
- 17.54 percent of customers gave a tip lower than 10%.
- What it means: Here, there’s no way to justify a low tip by saying you paid in cash. Seeing as though over 70% of the Seamless orders placed at these restaurants are from recurring customers, these customers definitely made the conscious decision to add a measly tip to their card on file.
- The highest tip percentage was a 40% tip.
- What it means: A really happy customer coupled with quick delivery? Or they just did the math wrong.
- The median order value was $22. The average order value was $30.11.
- What it means: There are a wide range of order types coming from offices, from large office-wide orders to one-off dishes.
- 2.3 percent of diners gave no tip.
The Consumer Goods and Financial Services industry verticals lie on the lower end of the tipping spectrum, while Consulting and Law take the cake.
The national average lies at 13.9% for delivery tips, and it’s clear that these banks are trailing behind (all but Morgan Stanley). UBS didn’t even come close, with a strikingly low tip percentage of 9.67%.
As the data shows, Morgan Stanley is leading the pack at 14.24%, with Barclays close behind at 13.40%. As for law firms, Allen & Overy impressed at 15.68%, with the entire legal sector demonstrating higher numbers across the board.
One thing to keep in mind while looking at aggregate company data is that obviously, there were individuals within the company who gave generous tips. These conclusions are not to say that everyone who works in these industries are looking to save a few bucks on tip.
Industry vs. Tip%
Bank vs. Tip%
Law Firm vs. Tip%
The Bigger Picture
In the end, this tipping data gives us a lot of insight into the psychology and habits of those who order through delivery apps, and into shifting consumer behaviors aided by delivery apps. We could draw conclusions about the type of people in each profession, or we could also realize that across the board, tip percentages are all lower than the industry standard.
Delivery technology and the ‘gig economy’ has given an old issue a new platform, namely the issue of designating workers as independent contractors not entitled to benefits and protection.
Fundamentally, the relationship to capital has not changed, and one could argue these apps have negatively affected the way consumers conceive of and interact with delivery workers, especially through tipping.
Tipping a faceless delivery person through the anonymous touch of a button seems to encourage a veil of thrift to hide behind, and is exacerbated among those who actually have the means to do otherwise.
As a restaurant owner, data about your customers is not only useful for exposing the tipping habits of multi-billion dollar corporations; it’s actually really important for you to monitor as a restaurant owner. If you’re on multiple delivery platforms, your focus should be on regaining control over the information they withhold from you.
Knowing what motivates your customers, what their lifestyles and preferences are, how loyal they are to your restaurant, and even how much they tip delivery personnel is extremely valuable.
To sum up, the restaurant delivery funnel is a tricky one. Everyone along the way is trying to make money: restaurants are trying to mitigate the high delivery commissions, consumers want to pay as little as possible for convenience, third-party delivery services have steep competition, and in the end, the delivery service workers get the short end of the stick. Maybe this brings to light some of the changes needed in the industry if we want everyone to have a fair shot.