The future of food delivery
Food delivery services are currently redefining the restaurant industry. Liam Thomas looks at how restaurants can ride the wave of disruption.
As the son of a chef, and a total foodie, I’m ashamed to admit that I’ve only cooked twice in the last two years. The turning point at which I put down the knives and picked up my phone was the sudden rise of delivery giants such as Uber Eats and Deliveroo – enabling the almost instant delivery of whatever, whenever.
I now have access to 370+ restaurants delivering almost anything I could desire in an average timeframe of around 25 minutes with real-time GPS tracking of my order.
The growth of these food delivery services is astonishing, with one or more delivery riders visible almost anywhere at any time of day. Uber Eats has risen from grassroot beginnings to revenues of nearly 1.5 billion (2018) and a suggested valuation of more than $20 billion (Morgan Stanley and Goldman Sachs) within only a few years – placing it among the fastest growth companies in history.
Restaurant operators can be forgiven for harboring mixed feelings about the disruptive influence of delivery platforms. Many restaurants looking to capitalise on these growth opportunities are leveraging advanced menu analytics and scrambling to build future-proof fitouts, dark kitchens and even cloud kitchens (more on those later). At the same time, many view these services as a direct attack and are grappling with the perceived cannibalisation of direct and in-store business and the confronting platform commission rates of up to 35%.
It’s clear things are changing rapidly, but where is this all headed, and what does this mean for the restaurateur of today and tomorrow? In March 2019, I attended the SXSW conference in Austin to hear firsthand what the Global Head of Marketing for Uber Eats, Nikki Neuburger, had to share about the future of food delivery.
The life-hacking connected consumer
We’re living in an on-demand economy. From Netflix to Amazon Prime, consumers are now conditioned to expect that they can get whatever they want, whenever they want it, proclaimed Neuburger. Food and beverages are no exception to this.
Highly connected consumers don’t simply switch off when they get home. An online selection of hundreds of food options acts as a natural extension to their connected day. The time benefit outweighs the additional cost - hacking back the precious time that would have been invested in planning, travel, shopping, preparation, cooking and cleaning.
Neuburger shared that Uber Eats has identified that many of their most loyal customers are planning or ordering before they even reach home, taking advantage of the downtime in transit. The prime target for these services is very much the time-poor who can reclaim as much as one hour by opting to use one of these services.
In-store sales cannibalisation
Many restaurateurs fear losing their own customers to these platforms. However there is no reliable quantitative evidence to suggest this is the case. Those who use these services are more commonly replacing cooking than dining out. The larger threat may indeed be to the bottom line of major supermarkets, many of which are now partnering with these platforms to deliver never before seen levels of convenience to the consumer, long resigned to the traditional 'weekly shop'.
To take full advantage of the opportunities presented by delivery services, operators need to carefully and strategically plan their digital offering – ensuring their menu is high-margin, transport-friendly and still broad enough to convert the discerning connected consumer. When properly implemented, restaurants report an average of 30% or greater increase to revenue, at least across the first major delivery platform they activate.
These platforms also act as a method of discovery for small businesses that struggle to effectively market themselves by doing away with the competitive nature of branding and fit out. Instead, they enable small battlers and startups to win on one thing, and one thing alone - excellent consumer ratings on a platform that people trust.
Changing retail dynamics – dark kitchens and cloud kitchens
The restaurants experiencing the greatest success on these platforms have recognised the special provisions required for mass delivery, as opposed to your casual takeaway or delivery order. These restaurants are now starting to create dedicated waiting areas for riders, ensuring that the in-store dining experience isn’t negatively impacted by a swarm of riders.
Some traders have even taken the additional step of rolling out dark kitchens and cloud kitchens (aka ‘virtual brands’).
A dark kitchen is a secondary location to a consumer-facing restaurant – generally offering a similar menu or cuisine - exclusively dedicated to servicing online orders.
A cloud kitchen is a business that operates online exclusively - without a retail consumer-facing location or brand. Many cloud kitchens are preparing multiple cuisines out of one restaurant. So the Thai you ordered today and the Indian tomorrow could be prepared by two specialty chefs from the same premises.
Both dark and cloud kitchens are often operating from semi-industrial areas, or central locations with much lower rent and overheads, greatly reducing the impact of the considerable commission paid to their marketing and delivery service partners.
Marketing and menu analytics
Menu analytics is possibly the most exciting and transformative advancement in the food business, and perhaps a significant justification for the high price paid to delivery giants. Uber Eats, Deliveroo and other leading delivery service providers have released powerful analytics and marketing platforms – enabling small business to access insights normally only available to large franchise or chain operators.
These platforms are supported by large data science teams, advanced algorithms, artificial intelligence and machine learning. They can provide insights such as: the popularity of particular dishes relative to their preparation time; which menu items customers are specifically coming back for; the popularity of a dish or a restaurant over time; which items on a menu are problematic for delivery (and why); how a restaurant is faring relative to its competitors; and common positive and negative customer feedback. The platforms can even go as far as providing insights into whether ingredient A or ingredient B in a signature dish is gaining higher satisfaction, and how many staff a restaurant might need for the night ahead based on the weather and day of the week.
Restaurants leveraging these platforms are significantly reducing preparation time, minimising waste and augmenting their menu in line with seasonal trends and consumer demand. In addition to data and insights, some platforms such as Deliveroo also offer a marketing suite, enabling restaurants to deliver special offers and promotions directly into the hands of customers.
So what’s the upshot for restaurateurs?
History is littered with examples of businesses that failed to ride their industry’s wave of digital transformation. Like any transformation, there will be winners and losers. Ultimately, any operator within an industry undergoing significant change needs to find a way to adapt and keep up with consumer demands – or face the reality of being left behind. However, for those who do choose to embrace the new world of food delivery, there are tremendous rewards to be gained – and the real silver lining is that you don’t need to be a giant to get on board.
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