Rising demand for home delivery is changing the foodservice landscape as consumer appetite for meals brought to them in a matter of minutes continues to grow at an exponential rate. Spending on delivery increased 19% in 2018, according to Cardlytics, compared with a mere 3% for the overall dining market.
There’s no doubt aggregator market places such as Deliveroo, UberEats and Just Eat have brought food brands to a much wider audience by hosting their menus online and, in many cases, providing the delivery infrastructure.
What’s not to like? Well, there’s the fact they charge a hefty commission for their efforts – about 30% of each order – and sever the link between food company and customer, starving the operator of important data.
This troublesome combination means foodservice brands are finding it tough to make a profit on a transaction they feel they have little control over and that isn’t necessarily driving loyalty to their brand. According to CGA, less than one-fifth (19%) of business leaders reckon this disconnected home delivery scenario is having a positive impact on consumers’ brand perception.
To steal the well-worn slogan of the Leave camp, it might be time for the restaurant and foodservice industry to “take back control” of home delivery. This is certainly happening in the US, where Chipotle, Papa John’s and Dig Inn among others are working hard on driving more home delivery transactions via their own apps.
They are partnering with specialists such as Olo and ChowNow, which help them develop online and app ordering platforms through which they can tap into third-party delivery providers such as Relay and DoorDash. Orderswift provides a similar service in the UK.
A flat fee is charged by the ordering platform provider and also the delivery company, with the benefits indisputable, according to Orderswift co-founder Matt Gilbert. He says: “Every order that can be funnelled through an in-house service means significantly more profits versus orders from third-party market places.”
The total cost per home delivery order could be closer to an average of 15% for a restaurant that uses its own ordering platforms and the services of specialist delivery companies in the UK such as Stuart versus the typical 30% charged by the market places.
The reality for many food firms is they will find it tough to wean themselves off the delivery companies. However, there’s evidence from Luke’s Lobster in the US that shows offering better menu pricing, exclusive offers and promotions, and menus optimised for delivery (which arrive at customers’ homes in prime condition) can provide an opportunity to migrate some people from market places and on to the restaurant’s own app or website when placing their order.
Foodservice companies taking back control in this way might become increasingly important because it’s clear the big move by Deliveroo and UberEats is to develop their own virtual brands with food produced in purpose-built dark kitchens. Many of these in-house brands have been created to satisfy demand for a particular cuisine in a specific geographic area.
The growth of these brands could lead to a Google Ads-type scenario in which restaurants are fighting (paying) for a high position in search results against in-house brands when customers type “Thai food in London N8”, for example.
This paints the picture of a potentially harsh environment and suggests an increasingly fractious relationship between market places and the restaurants and foodservice companies. Perhaps it’s time for them to consider how they handle the food delivery phenomenon and assess their relationships with the delivery companies.
Glynn Davis, editor of Retail Insider
This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.