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Pivoting For Progress: Why Careem Turned To A 0% Commission Model For Its Food Delivery Business "At Careem, our mission is to simplify and improve lives. The previous model we used with our restaurant partners did not live up to our mission; so, we pivoted."

By Mudassir Sheikha

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Three months into 2021, and the word "recovery" is a tentative whisper for some in our region, and an enthusiastic shout for others. The enterprise I lead, Careem, is somewhere in between the two- after a tough last year, we're thankful to be firmly on the path to growth and full recovery.

Our relatively new food delivery business played a big part in Careem's recovery. As our customers stayed at home during lockdowns, Careem delivered food straight to their doors. This was made possible by our partnership with tens of thousands of resilient, adaptive, hardworking people in the restaurant industry.

But even with a sharp increase in demand for food delivery, restaurants in our region are struggling- they lost the majority of their in-dining customers due to lockdowns, and in some cases, were forced to shut down for good. Food delivery became a lifeline for both Careem and our restaurant partners. But at some point, the food delivery business model no longer worked for restaurants.

We, like other aggregators in the Middle East, were charging restaurants a commission fee to be hosted on our Super App, providing them with delivery, payment processing, and customer care. Restaurants that previously could only reach a hyper-local market, could use our Super App to access more customers, resulting in higher revenues. They focused on making delicious food, and we focused on simplifying the customer's experience with fast, reliable delivery, easy payment options, and attentive customer care.

Our commission fees, therefore, seemed like a fair deal on the surface. But here is where restaurants felt the pinch: the larger the order they received, the more they paid in commission fees, even though the services we provided remained largely the same. This meant that restaurants in our region were caught in a catch-22- heavily reliant on aggregators to stay afloat, but unable to retain value due to high commission fees.

Related: Support The UAE's F&B Sector Hit By The COVID-19 Crisis: A Call For Delivery Apps To Cap Their Commissions At 10%

At Careem, we have always been driven by a purpose to uplift our region. We are passionate about contributing to a healthier industry and ecosystem, and are big believers that fair play and transparency are key to unlocking the economic potential in our region. We want to see our partners grow, innovate, and support more families and communities. Our restaurant partners rely on us to connect them to our customers, but not at the expense of their own success.

So, we did what we do best- simplified working with an aggregator by designing a new approach that is sustainable for both restaurants in our region and Careem. We've introduced a 0% commission model. In place of the commission, our partners subscribe to a bundle package based on their needs. We charge for payment costs on cashless transactions to cover what credit card companies charge us, and a flat delivery charge to cover the cost of the delivery.

Our offering remains the same in this new model: discoverability to our millions of customers, reliable deliveries, seamless payments, and world class customer care. This means our restaurant partners can earn more, grow faster, and focus on the food while we simplify the rest.

This isn't a one-off action though- this is the model we will be using now on. At Careem, our mission is to simplify and improve lives. The previous model we used with our restaurant partners did not live up to our mission; so, we pivoted. Our vision is to become the most trusted Super App in the region, and we know that restaurants, big and small, will grow to trust us as partners because our interests are now aligned with theirs. And when we're aligned with our partners, our customers get access to wide selection, fast deliveries, and most importantly, high-quality food prepared with passion and love.

Careem is here for the long run; we believe in creating real value for all our stakeholders, and our 0% commission model is our way of doing just that.

Related: UAE-Based RadYes Can Help Transform Your Social Media Content Into A Sales Transaction

Mudassir Sheikha

Co-founder and CEO, Careem

Mudassir Sheikha is the co-founder and CEO of Careem. He grew up in Karachi, Pakistan, before graduating from the University of Southern California with a degree in economics and computer science and then completing a masters degree in computer science at Stanford.

Mudassir’s career in tech started with Silicon Valley startup Brience. Mudassir then moved back to Pakistan and co-founded DeviceAnywhere, a company that was acquired by Keynote in 2008, and he went on to join management consulting firm McKinsey & Company in Dubai.

In 2012, he left to form a new company with ex-McKinsey colleague, Magnus Olsson. The idea was not just to build a big business, but start one that would have a big impact, be meaningful, and with a mission to simplify and improve lives and create an awesome organisation that inspires. From that came Careem.

Today, Careem is the leading technology platform across the greater Middle East and was recently acquired by Uber in the largest industry transaction seen in the region. Careem operates in more than 100 cities across 14 countries with more than 1,300 colleagues and well over one million captains on its platform.

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