By Steven Romero
Food delivery isn’t just for Chinese takeout or late-night pizza anymore. Nowadays, it is becoming just as common to order a convenience store snack as it is to order a complete dinner. Options are increasing, and the industry is determined to fill the rising demand for delivery that comes along with the surge in variety. New independent delivery platforms offer a way for restaurants and other stores to manage the volume of orders, and more businesses are taking advantage of the convenience they provide—letting platforms handle the entire delivery process in return for a portion of revenue.
But like any rapidly growing industry, food delivery has its share of obstacles. Questions remain regarding the most effective way to sustain a model of independent food delivery while simultaneously growing a loyal consumer base. After experimenting with flat delivery rates, platforms have now been attempting to bundle different options into a monthly subscription package. Despite some initial success, the future of independent food delivery platforms is not assured, and two important factors will decide the platforms’ success going forward. First, the platforms will need to find an effective cost model that satisfies consumers while attracting new users. Second, restaurants will need to adapt to handle demand from the new delivery sector of the market; many will need to adjust or overhaul the way they process food orders to effectively capitalize on the opportunities offered by these platforms.
The food delivery industry is here to stay, as evidenced by its recent growth. Customers’ demand for these services has ballooned the industry to $82 billion so far, and it is poised to double in value within the next six years, according to Forbes. A few players have risen to the top in North America, the UK, China, and other nations. Although the dominant companies vary by country, the underlying pattern remains that the global appetite is bigger than ever.
The recent emergence of online delivery services mean that growth has so far been driven largely by the increased availability of food options. However, as delivery options increase, customers will become more picky with which service becomes their primary ordering app and will expect a better deal out of each transaction.
Consumers’ demand for convenient food extends far, but there are some limits regarding how much they would pay for certain orders. When Postmates started delivering Starbucks in 2015, the $5.99 delivery fee applied to every order, even for a single coffee. An article by The Spoon billed this method as unsustainable, and the industry responded quickly. Starbucks began partnering with Uber Eats to deliver at a lower total cost. Nonetheless, are these lower fixed rates sustainable enough to make food delivery a long term option for retaining customers? So far, fixed rates have not proven themselves among consumers that prefer to make smaller orders on an irregular basis. Although the allure and convenience of delivery can still be enough to outweigh the downside of a fixed rate, food delivery platforms are searching for a model that will reduce costs per order but will result in more orders per customer.
The subscription model is poised to add this stability to the food delivery industry. As The Spoon’s article discusses, this model represents an essential step toward a successful platform. The article also analyzes the various subscription models in use already: DoorDash debuted DashPass in 2018, with a monthly fee of $9.99 for unlimited ordering. However, success has been limited by a much smaller pool of restaurants that are willing to provide the subscription service, and a minimum order of $15 has turned off consumers who prefer multiple smaller orders of beverages or snacks. No subscription service has had success in the mainstream just yet, but given the current growth of the delivery industry, it is only a matter of time before a lasting model emerges. As the number of participating businesses on these platforms approaches closer to the physical eateries available to any given consumer, the cost of delivery remains a barrier. Bundling all of the restaurants into a subscription service will create more loyal consumers and will allow them to enjoy more convenient options for a simple monthly fee.
Nonetheless, while independent food delivery companies are racing to improve their services and separate themselves from the rest, they do not have complete control over the success of the industry. Restaurants and other stores are faced with a difficult decision when deciding if and how they will get involved with these platforms. Choosing to partner with a third-party delivery platform is not always an easy decision for a business. Their kitchens must be able to keep up with demand, and their location must be able to physically process and organize the orders for pickup. Increased revenue is hard to pass up (even subtracting the cut taken by the delivery service), but not all restaurants are properly equipped to process the orders from these services. Some restaurants have already maximized their capacity for delivery; Chipotle’s shelf system allows online orders to be organized in a place easily accessible to food delivery drivers. However, other restaurants are not designed to handle a high volume of outside orders, and may even choose to deliver their own food without using a third-party service. While every restaurant might not be able to follow Chipotle’s method exactly, they must find their own personalized method of processing remote orders quickly and accurately.
Food delivery platforms are not going anywhere, but the industry is still undergoing major developments. The success of the subscription model will be an essential step going forward and will enable companies to engage customers more effectively. Not only will this type of model eliminate the glaring flat rate delivery fee that is a turn-off for consumers, but it is also more likely to create a regular habit of ordering for many consumers. Everyone needs food, and for those that would benefit the most from consistent food delivery, an affordable plan with a delivery platform is extremely enticing. These platforms also know the benefit of partnering with the most possible food providers, and they are counting on those businesses to fine-tune their own method of processing orders made through these platforms. Not every company can utilize a model as effective as Chipotle’s delivery shelf, but they can make big improvements and further ease their integration with platforms. In addition, the increasing availability of candy, toiletries, and other convenient items delivered through these platforms will continue to expand the industry in several directions. It will capture new consumer bases and extract more value from regular users alike.
The food delivery industry will reach its full potential when it is able to satisfy consumers with a pricing model that satisfies the majority of people, and when the physical stores that provide food maximize their methods of processing orders. Ordering food for delivery is becoming as normal as getting in your car and driving for takeout, and it is a trend that shows no signs of slowing down. And while the bevy of options now means that a late night snack can be whatever you choose, chances are, pizza might still take the number one spot.