How Much Do You Tip?

Key Takeaways:

• The West Coast isn’t the best coast for tipping. 
• Kroger is crushing delivery. 
• Kroger’s digital push is competition for DoorDash. 

Toast, which provides software solutions to the hospitality industry, recently released a survey on tipping. 

From debit, credit, and digital-payment transactions, Toast found that the good people of Cleveland, Ohio, tip the most in the nation. An average of 20.6%. Nobody else on the list even hit 20%. 

Denver, Salt Lake City, Phoenix, Richmond, Chicago, New Orleans, New York and Washington, D.C., range from 19.8% to 18.6%. 

But here’s the real embarrassing part, America: Three of the nation’s wealthiest cities woefully round out the top 12. At #10, Seattle tips 18.0% on average, followed by #11 Los Angeles at 17.5% and #12 San Francisco at a paltry 17.0%. 

The 2021 median household incomes in those places: $101,721 in Seattle, $76,367 in Los Angeles, and $116,005 in San Francisco. 

Quick note on LA: It’s massive. So the median incomes in the city’s most desirable, core neighborhoods, such as Hollywood and parts of the Westside, easily approach and often top six figures. 

In Cleveland, the median household income is $33,678. 

With seemingly so much more money to spare, we brainstormed around The Juice office to try to make sense of the discrepancy. 

• Most popular and obvious answer: The cost of living is higher in these West Coast cities than in Cleveland. True. But if you’re dropping $4,000 a month on rent, what’s another few dollars on your $100 dinner tab to at least hit 20%? Cheapskates! 
• Second-most popular and not-so-obvious answer: Assuming food and grocery delivery services are more popular in tech hubs such as Seattle, LA, and SF than in Cleveland, those high DoorDash (DASH) fees may have changed people’s perspectives on tipping. No matter how much money they make. 

Speaking of DASH, the other day, The Juice reiterated our love for it. The company’s space continues to get more interesting. 

Gopuff, which was a promising delivery service, just laid off employees for the third time in less than a year. And Food Rocket, which hoped to expand out of Chicago to other U.S. cities, just ran out of money. 

Increasingly, DASH and Uber (UBER), via Uber Eats, appear to be the biggest, most sustainable players in the space. But don’t forget about grocery stores, like Kroger (KR). 

• On its earnings call earlier this month, Kroger said sales grew 22% in its “delivery solutions” segment year over year. 
• Kroger says it will invest more into its delivery network. If approved, its merger with Albertsons (ACI) should accelerate the process. Both companies have huge brick-and-mortar networks to service digital consumers. 
• According to Kroger, these digital consumers shop and spend more across the entire ecosystem than non-digital consumers. 

The Bottom Line: Guess how many people pay roughly $10 a month or $100 a year for DoorDash’s DashPass membership, which provides perks such as free delivery and lower fees?

As of the end of 2022, 15 million! We were surprised also.

Don’t you think Kroger would love to bring those 15 million shoppers into its ecosystem, especially as it prepares to merge with Albertsons and up its digital game? 

So many possibilities, which makes us particularly bullish on DASH and KR and ACI for near- and long-term investors.

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