We’ve all been there. Friday evening rolls around, and we’re tired. The combination of our week at work and having to cook dinner every evening is exhausting. No size glass of wine can help muster up the strength to choose what to have for dinner and cook it. That’s when we unlock our phones and open up our trusty apps to peruse what restaurant we will order food from this time. Gone are top kitchen drawers being packed to the brim with takeaway menus. Gone are the days of only having the choice of Chinese, Indian, or Fish and Chips for a takeaway.
We are in a society of options and a diverse takeaway community. Thanks to apps like Just Eat, Deliveroo, and Uber Eats, we can get a glimpse of a country and culture through its cuisine. We are spoilt for choice and able to be lazier than ever due to ever-evolving technology and having the food delivered to our door. At the same time, you stay warm and, in your pyjamas, making the food taste that much more delicious.
How the food delivery sector has changed in recent years:
Food delivery services have become increasingly popular year after year. The lockdowns due to COVID skyrocketed the use of food delivery apps. Customers could no longer visit their favourite restaurants and cafes for food, so incorporating a delivery system was vital in helping these businesses survive. There was an increase in orders for food delivery services during lockdown. Trying a new restaurant or dish broke up the monotony of life in lockdown.
In the first quarter of 2021, Deliveroo reported a 130% increase in gross transaction value compared to the same period pre-covid. Competitor Just Eat generated £4.4 billion in 2021. With the dramatic rise in orders using food delivery services, the food delivery market in the UK was valued at approximately £10.5 billion in 2021. Globally the value of the online food delivery market was at £168 billion in 2021, a time that saw lockdowns come and go in quick succession.
The prediction for the food delivery sector is that it will keep growing, although perhaps at a different pace during lockdown. The expectation is the UK’s food delivery market will grow to an estimated £14.6 billion in 2024. Between 2022 and 2028, there is a predicted compound annual growth rate of 10.8% in the global online food delivery market.
What is the process of ordering from a delivery app?
- Customer orders the food from their chosen restaurant.
- The food delivery service charges fees to the customer and the restaurant. These fees are the service and delivery charges.
- Payment is taken from the customer for the order using an ecommerce payment gateway.
- The restaurant or café receives orders from the food delivery service.
- The eatery processes the order.
- The food delivery service provides and assigns its courier.
- When the food is ready, the chosen courier delivers the food to the customer.
What are the advantages of businesses using food delivery apps?
Businesses can widen their customer pool by partnering with a food delivery service such as Just Eat or Deliveroo. Without spending money on marketing, businesses will have their name and often accompanying photos on the site.
Additionally, the prospective customer pool is widens with proximity to the restaurant not being an issue. Customers can find other restaurants that are further from home still within their area.
A further advantage of food delivery services is that they allow businesses to take more orders during slower trading times. Outside the breakfast, lunch, and dinner periods, restaurants and cafes may find fewer customers dining in. Food delivery services allows business to continue throughout the day, with customers ordering food for delivery. Furthermore, when the weather is terrible, customers may be less likely to dine in, and delivery services mean businesses can continue making money.
What aspects of food delivery services leave a bad taste in our mouths?
Although offering businesses the opportunity to increase orders, there are financial disadvantages for businesses using third-party delivery services. As previously mentioned, in ordering from a food delivery service, fees are attached for both the business and the customer. These delivery and processing fees cut into the business’s profit margin as delivery is increasingly becoming the preferred way of dining. With some third-party delivery companies charging up to 30% of the transaction, businesses are having to act to offset the cut to profits. For some businesses, this has meant increasing the prices of their items on the food delivery apps. As a result, customers are paying a premium to use food delivery services. It is often significantly cheaper for customers to order the same meal in-house.
With the recent increase in the cost of energy and many food items, this price hike passes on to businesses. Businesses are already facing a tighter profit margin. Still, there is also the need to balance the customers who order in-house versus delivery. Increased deliveries paired with decreased customers dining in has left some businesses’ profit margins at a negative level.
Businesses, by using food delivery services, are relinquishing control over the product the customer receives. This may lead to more complaints against a business when it is out of its power. For example, if a meal arrives to a customer cold due to traffic, this is not the restaurant’s fault; however, they are the ones who face the risk of negative reviews.
How can businesses take these high fees off the menu?
The reality is that in our society of choices, businesses need to offer customers delivery. However, paying astronomical fees may not be feasible in a year of financial uncertainty. As a result, some businesses are demanding a reduction of these costs due to the negative impact on their profits.
The alternative is for businesses to turn their backs on third-party delivery services and create their own. Fast food tycoon McDonald’s has recently launched their delivery service to offset the losses from third-party services. Although still available on services such as Uber Eats and Deliveroo, their app offers discounted food to customers. This could incentivise customers to switch from the apps they know and use McDelivery instead. Although there is no minimum spend, customers will still pay a small delivery fee.
For smaller businesses, launching their delivery system may seem daunting, especially when they want to be still able to take card payments. By using ecommerce payment gateways and virtual terminals for card payments, businesses will be able to accept card payments for orders.