Pricing squeeze hits food delivery apps as GAC monitors anti-competitive practices: Study

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The food delivery app sector in Saudi Arabia is experiencing rising pricing pressures amid intense competition among major players, against the backdrop of increasing reliance on discounts and promotional offers as a primary tool to attract users and boost market share.

 

In this context, through a recent study, the General Authority for Competition (GAC) identified a number of contracts and practices that may have a direct impact on the fairness and sustainability of sector competition. Notable price discrepancies have been observed between delivery apps and the restaurants' own prices, affecting all market stakeholders, including restaurants, delivery service providers, and ultimately end consumers.

 

Current market dynamics reveal fierce competition for dominance among local delivery apps, accompanied by mounting pressure on operating companies. This accelerating price war raises questions over operating costs and long-term profit sustainability.

 

In a price monitoring exercise conducted by Argaam comparing the prices of several meals across delivery apps versus the restaurants' native apps showed price variances ranging from around 20% to more than 80% for some orders, depending on the meal type and the platform used.

 

The analysis also indicated that while prices of most meals were identical across different delivery platforms, some apps featured exclusive deals with specific restaurants. These exclusives reflected in discounts on meal prices ranging between 20% and 30%, compared with prices listed on competing apps.

 

*Meal prices without promotional offers - Delivery fees include service charges and are the average for meals shared across apps.

 

Regarding delivery fees, the data showed that Ninja offers the lowest on average, while HungerStation collected the highest rate among the under-study applications.

 

It was also noted that some apps offer discounts on delivery fees or provide free delivery when the order value exceeds a range of SAR 30 to SAR 35 when ordering from certain restaurants, albeit this does not apply to some other restaurants despite their meal prices exceeding the said range.

 

The analysis also noted that both HungerStation and Keeta display a “service fee” item equal to 2% of the order value, with a minimum of SAR 0.5 and a maximum of SAR 2, within the payment details, whereas this item does not appear in Jahez and Ninja apps.

 

Historical overview of Saudi food delivery sector

 

Food ordering and delivery services in the Kingdom have witnessed rapid transformation, driven by the widespread of mobile devices and changing consumer behavior.

 

 

With the consolidation of delivery culture and the growing reliance on applications, access to daily goods and services has become easier than ever, paving the way for accelerated growth in the number of applications and the intensity of competition among them.

 

In this regard, Jamal Al-Fadhli, a specialist in marketing and delivery apps, said that the market will reach a stage of stability, with prices becoming suitable for all customer segments. He noted that restaurants will eventually adapt to the challenges they face, given that the behavior of most consumers has shifted toward ordering through applications rather than directly from restaurants, due to the easier experience and savings in time and effort that these platforms provide.

 

Al-Fadhli pointed out that the current phase of pricing pressure is temporary and aims to attract potential customers to the applications and familiarize them with their use, after which a unique experience will be offered that other applications do not provide. This, he said, would make the business model of these applications one of sustainable competition.

 

Jamal Al-Fadhli, a specialist in marketing & delivery apps 

 

He explained that Keeta’s entry aims to capture available market share, particularly from smaller players that lack distinguishing features and are unable to offer their services at prices lower than those of major companies.

 

He added that the mistake made by Shgardi was relying in its marketing on a non-Saudi team based outside the Kingdom that did not understand local culture and consumer behavior, creating a significant gap between the platform and its target audience.

 

Al-Fadhli also noted that among the most prominent violative practices he observed is that some large platforms offer prices below cost with the aim of pushing smaller competitors out of the market. These losses are borne by the restaurants themselves, which have suffered significant financial damage, in addition to delays in the disbursement of their dues, leading to weak liquidity, the distress of some restaurants, and their exit from the market.

Why price slashing?

 

GAC indicated that a food delivery platform may be considered to hold a dominant position when its market share reaches or approaches 25%. The authority may also be deemed influential even at lower levels if other factors are present, such as financial capacity, brand strength, and operational resources.

 

Additionally, GAC emphasized that assessing competitive conduct is not limited to market share figures alone, but rather to the actual or potential impact on the market itself.

 

In delivery apps, the average revenue per order is limited after accounting for commissions, delivery fees, technical support, and marketing costs. As a result, economies of scale become a decisive factor, as higher order volumes allow fixed costs to be spread and improve profitability per order, bringing the company closer to achieving financial sustainability.

 

The same applies to customer acquisition costs, as delivery platforms spend substantial amounts on discounts and promotional offers to attract users, which raises acquisition costs in the early stages.

 

As for marketing and pricing strategies, GAC affirmed that offering discounts and promotional campaigns, including penetration pricing, is in principle a legitimate part of competition, particularly for newly entered platforms.

 

It clarified that discounted prices and customary promotions do not in themselves constitute price slashing (predatory pricing) but rather represent one of the competitive tools protected by the law.

 

As the user base expands and order frequency increases, these costs begin to decline relatively, and the relationship between what the platform spends to acquire a customer and the long-term value generated from that customer improves.

 

However, GAC stressed that excessively low pricing or bearing large losses for medium or long periods with the aim of undercutting competitors or preventing market entry may constitute an abuse of a dominant position, if the objective or potential effect is to harm competition.

 

Such practices, according to the authority, are classified as violations if used as a tool for market dominance and for imposing higher prices at a later stage.

 

GAC also explained that selling services at prices below average variable cost (AVC) is considered economically irrational behavior, as it means the platform incurs a loss on every order and cannot avoid these costs. Accordingly, the authority considers a platform’s final pricing to be predatory if it is below average variable cost.

 

It clarified that, when calculating variable costs, it considers all costs directly related to providing the service, including direct discounts on orders and certain marketing costs, while excluding fixed costs such as marketing staff salaries.

 

Meanwhile, the authority monitors whether the violating platform is later able to recoup its short-term losses resulting from below-cost pricing by charging higher prices to customers after excluding competitors and strengthening its market power, which constitutes an additional indicator of price slashing.

 

Moataz Aldakhayil, a specialist in SME performance & monitoring, said the strategy of some delivery applications relies on price slashing to gain market share, benefiting from their strong financial capacity and their status as privately held companies not listed on stock exchanges, which keeps them away from the well-known pressures faced by public-market investors.

 

Moataz Aldakhayil, a specialist in SME performance & monitoring

 

He explained that once a certain market share is reached, platforms shift toward profitability and maximizing returns, noting that consumers prefer this type of apps. In contrast, restaurant owners need a period of stability in dealing with delivery platforms, especially given their large number and the multiplicity of unclear offers.

 

Aldakhayil noted that an increase in the number of competitors is healthy for consumers and restaurants; however, expansion following the same model as Keeta is unhealthy and negatively affects the sector’s structure.

 

He added that the sector is witnessing a change in customer behavior, as consumers have begun to seek discounts and free delivery. At the same time, the market has shifted from having one medium-sized competitor such as HungerStation alongside several small companies, to three major competitors and two or three mid-sized firms.

 

He explained that the rapid growth in activity resulted from social and consumption changes, describing it as abnormal and unsustainable growth. He pointed out that Shgardi did not achieve sufficient market share to grow, stressing that globally, the sector has seen some competitors grow rapidly and others exit the market in the post-COVID period.

 

He added, “I do not believe that Shgardi made a fatal or strategic mistake; rather, the market is growing abnormally, and with competitors that have greater capabilities, dealing with it in a traditional manner leads to exit. The market should have been treated as an extraordinary one that requires unconventional ideas.”

 

He noted that if indirect costs are considered, many apps sell below cost. However, this is not quickly detectable and can only be identified through inspection and auditing, which he does not see as effective.

 

He stressed that the solution lies in accepting the presence of large platforms and preventing acquisitions that would result in any single platform exceeding 40% of total market share.

 

Aldakhayil expected competition to continue as the market corrects itself, with adjustments moving toward market segmentation, whereby each application specializes in a specific category, such as desserts, a particular type of restaurant, or cafés, making growth economically viable.

 

He explained that competition will shift from merely providing delivery services to deepening the service and its depth, resulting in a win-win relationship for all parties: the customer, the platform, the courier, and the restaurant.

 

Sector indicators

 

Data showed rapid growth in the food delivery applications market in the Kingdom compared to the overall food services market. While the traditional market maintained a gradual growth trajectory after recovering from the impact of the COVID-19 pandemic, sales of delivery applications jumped from SAR 2.8 billion in 2018 to SAR 16.2 billion in 2023, raising their share in the food services market from 3.5% to 14.4%.

 

This shift reflected a structural change in consumer behavior and the increasing migration of food spending towards digital applications.

 

 

The total number of delivery orders increased from 228 million in 2023 to 408 million in 2025, representing a growth rate of 79%.

 

 

The distribution of orders in 2025 revealed a high geographic concentration in major cities, with Riyadh alone accounting for around 44% of total orders, followed by Makkah at 22%, and Eastern Province at 16%.

 

On the other hand, the remaining share is distributed across other Kingdom-wide regions at smaller levels, indicating a clear disparity in demand density among distinct cities and reflecting differences in the level of reliance on food delivery services.

 

*All Saudi regions

 

On the workforce in the order delivery activity, the number of Saudi drivers increased from 115,000 in 2023 to 140,000 in 2024, while the number of non-Saudi drivers rose from 285,000 to 302,000 over the respective years.

 

 

Concerning the delivery fleet structure, the number of motorcycles leapt from around 4,800 in Q1 2024 to more than 19,000 in Q4 2024. In contrast, the number of vehicles recorded a gradual decline by the end of the same year.

 

This shift was driven by companies’ efforts to reduce operating expenses and improve delivery efficiency in cities, particularly amid rising demand density and traffic congestion.

 

Given this rapid growth in the local food delivery app sector and the structural shift in consumer behavior, the challenge of transitioning from a phase of price wars and price slashing to a more sustainable competitive model becomes evident—one that balances user acquisition with profitability, without harming competition or imposing additional operating burdens on restaurants.

 

As GAC continues to monitor market behaviors and practices, the future of the sector remains contingent on companies’ ability to recalibrate their business models in a way that ensures a fairer and more efficient market for all stakeholders.