The big bucks of small change: Counting the cost of new tipping trends

Simon Blacher remembers the golden era of cash tips well from his time pulling pints at Melbourne bars.

I used to work in high-volume bars and pub situations, nightclubs and late-night venues, says Blacher, director of Commune Group, which operates multiple Melbourne restaurants including Moonhouse and Hanoi Hannah.

People would give you a $20 note for two or three beers and say ‘keep the change’. It was a very natural transaction – it happened very easily.

But Blacher says in 2022, cash tips in Melbourne are few and far between and tip jars are relatively empty.

In the post-pandemic world everything is driven by tech and EFT [electronic funds transfer], and the fact is that cash after COVID is considered dirty in a way – like passing your dirty tissue to someone, he jokes.

The pandemic hastened the death of cash and, by extension, the cash tip. But at the same time, customers are now being prompted to tip more than ever before: through eftpos payments, QR code food-ordering platforms, ride-sharing and food delivery apps.

Gary Mortimer, professor of retail marketing and consumer behaviour at Queensland University, says the increasing use of apps and payment platforms during the pandemic was quietly used to reinforce a tipping culture.

Any sort of app, or eftpos machine, or signage that encourages a consumer to pay over and above for the product or service is essentially attempting to create a culture where it becomes an expectation, he says.

In Australia we’ve never really had a tipping culture. [Unlike the US] We haven’t had a minimum wage situation where people are really struggling to make a couple of bucks an hour, but where we’ve certainly seen tipping culture start to emerge is through apps.

Broach the topic of tipping in many online forums or social circles, and the reaction against tipping being a norm in Australia is fierce. Mortimer says this could be fuelled by prompts on payment platforms, especially when people are asked to tip before receiving a meal or service, which runs the risk of turning customers off entirely.

Tipping really does need to be inherently a voluntary transaction, he says. Australians are relatively individual types of consumers. We don’t like being told to do things or forced into situations, so I’m not sure if those types of apps provide a good customer service. I wouldn’t be surprised if it creates a negative sentiment and consumers vote with their feet [and go elsewhere].

But data obtained from numerous menu apps and payment platforms shows tipping is alive and well post-pandemic.

Food ordering and payment platform me&u, which operates via QR codes on tables in restaurants, transmitted $2. 2 million in tips for hospitality staff across Australia last year. That represents about 1 to 2 per cent of the total transactions made on the platform. It was a 672 per cent increase in tips from 2020 (when the company first launched its tipping feature).

Chief executive of me&u Katrina Barry said some restaurants had seen a 50 per cent growth in tips since the tipping function was added to the app, while some restaurants that never previously collected tips were now receiving a decent stream.

The Boatbuilders Yard in South Wharf never used to get tips, and thanks to me&u they now generate $2000-plus in tips a month, she said, noting that her firm’s data showed the most generous tippers in Victoria were in South Wharf, Melbourne CBD, Brunswick, Portsea and Falls Creek.

Data from technology business Square, which provides financial services products for restaurants and other industries, showed the average tip size in Australia was about 10 per cent pre-pandemic and has fluctuated since, affected by wider economic trends.

The statistics show average hospitality tips almost recovered to pre-pandemic levels in January, hitting 9. 5 per cent, but then fell to 8. 1 per cent in May as cost of living pressures took hold.

Tip data also shows other trends. According to Square, Victorians give larger tips than customers in New South Wales and Queensland (10. 7 per cent on average in May, compared with 6. 6 per cent in Queensland and 6. 3 per cent in NSW). Tipping is most common in NSW, according to Mr Yum, a rival food ordering and payment platform.

A spokesman for Mr Yum said the ACT has the second-highest number of tippers, followed by Victoria, Queensland, Tasmania, South Australia and then Western Australia.

Mr Yum, me&u and Square all allow restaurant operators to determine how tips paid through their platforms are distributed among staff, while Uber said 100 per cent of tips paid to it go directly into the accounts of drivers and delivery people.

Punters who wish to tip at Blacher’s Melbourne restaurants do so now through eftpos machines by nominating a percentage at the end of their meal, and those tips are distributed to all staff working on the shift, on top of their base wages.

Although he admits it’s killed some of the romance of the tip, Blacher says digital tips can make the process easier to calculate a 10 or 15 per cent tip, and it’s simple enough for people to hit no if they don’t feel a tip was warranted.

We’re not like America where it’s embedded in our economy, but hopefully some tipping stays part of Australian culture in some way, he said. It’s meant to reward good service and great hospitality.

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