News flash: delivery is big. It's revolutionized a number of industry verticals —electronics, clothing and fashion, groceries, and even razors. And there’s no choice but for it to continue on a long growth trajectory, with so many people choosing to order from their couch instead of going to the store. The restaurant industry is no different. With third-party services announcing new national partnerships with increasing regularity, it seems like only a matter of time before every restaurant succumbs to selling on their platforms.
Ordering online has its obvious draws: for consumers, it serves as a convenient substitute for dining in a restaurant or preparing meals at home. And maybe most enticing, you get variety (you can have both enchiladas and Moo Shu Chicken in one sitting).
But while there are some benefits of third-party delivery for restaurants— particularly the wider distribution network it allows for — they’re really not gaining much incremental revenue. Restaurants are paying high fees with off-premise delivery partners, but not seeing order improvement. And if everyone is increasing their order percentage, then do you really gain any incremental advantage from being listed first?
Control is certainly the name of the game of third-party delivery companies, as Grubhub, DoorDash, Postmates, UberEats and others capitalize on this changing consumer behavior.
The latest Why? Behind The Dine report published by Acosta shows Millennial diners spending an average of $513 per month on food, with 40% of it being spent on food prepared outside the home. Gen X Diners are equally spendy, allocating 32% of their $469 monthly grub budget on food prepared outside home.
Ordering delivery is clearly a convenient meal solution diners love. In the past three months, 51% of total U.S. diners and 77% of Millennial diners ordered delivery food either from a restaurant or a third-party delivery service. And according to Bloomberg and Forbes, food delivery services like GrubHub and UberEats are experiencing exponential growth.
The draw is that these platforms are sticky. The patterns in which consumers are ordering and eating have changed, some of which has to do with technology. The rest of it has to do with the marketing spend of the third party services, however. UberEats and Postmates, along with Doordash, Grubhub and others are all competing with one another for market share. In the process, they lead consumers to not associate a food experience directly with a restaurant brand, but rather look for the lowest prices.
Customers are not necessarily loyal to one app over another — in fact, people are jumping from platform to platform, looking for the best deal — but they are loyal to the idea of using third party delivery apps. The result: diminished loyalty to the actual brands and restaurants on each platform.
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What do the experts say?
UBS published an 82-page report this June titled “Is the Kitchen Dead?”, in which they made a case for increased global online food ordering sales. UBS forecasts delivery sales could rise an average of more than 20% per year to $365 billion worldwide by 2030, from $35 billion now.
Researchers present four possible future implications of delivery platforms that depend on two things: logistics and consumer demand.
Scenario 1: If infrastructure for delivery continues to roll out, the improved logistics will make delivery more efficient and prices will go down. Coupled with continued consumer demand for convenient food, food delivery would thrive. Cue, the rise of dark kitchens. But if consumer demand for pre-prepared food doesn’t rise in tandem, we could see business models like Amazon/Whole Foods and meal-kit companies like Blue Apron thriving. The restaurant market would have minimal disruption.
Scenario 2: If infrastructure and efficiency is hindered due to labor regulations for delivery workers (safety, benefits, wages) growth may lag. If consumers continue to demand convenient, prepared food, it will still be there in some form. But it may become more of a niche offering, given the low scale and high cost of delivery. Coupled with lower demand for food delivery, though, we may see people reverting to traditional cooking, and the food delivery industry could be challenged. This is the less likely scenario, given growth projections.
Isn’t this out of my control?
Fear not! The restaurant vertical as a whole has finally started to allocate budgets to customer engagement, loyalty platforms, and data capture, starting with the big players like Domino’s and Dunkin’ Donuts.
And there's a lot of tech out there to help smaller restaurants transition into the digital direction the restaurant industry is heading in to and regain control. Partnering with a Customer Engagement Platform is the most cost-effective and ROI-producing strategy for restaurants. And there are a lot of solutions out there.
Rather than running a promotion through Grubhub or giving up an even higher revenue share for a (maybe) higher listing, time and money would be better spent focusing on understanding your customers better and personalizing their experience to secure better ratings and repeat orders.
A good first step would be offering delivery through your own website. Provide an incentive for customers to bypass the third-party delivery services. Companies like ChowNow and UpServe build online ordering into your website which can integrate with your existing POS, giving you access to information about the customer (like email address and order frequency) and adding a revenue source to your restaurant without disrupting in-house operations.
Pricing menu items higher on delivery platforms is one way restaurant owners can push customers to dine-in or order directly through them. Be careful with this, though as it may backfire with some customers who will interpret it as a shady strategy. Offering a flat discount to customers who order through your site may be a better approach.
Merchandising the fact that you offer delivery through your own website or app is another important way to let your customers know they have the option. This can be done through decals on the door, in-house collateral in the form of postcards or fliers, or even just training your front of house team to let customers know when they come in to order.
Bikky does that and much more. Bikky is a marketing service for small-to-medium sized restaurants that gives you the competitive advantage in the online ordering landscape. By providing smarter, data-driven SMS marketing, Bikky helps you stand apart in a crowded space marked by high fees and many consumer choices.
The priority in restaurant marketing right now should be identifying and obtaining a holistic view of your customers — trying to understand what motivates them, where they live, and their lifestyles, and preferences. The trick is to merge together all your current sources of customer information.
That’s where Bikky enters the picture. You can only achieve loyalty if you know how to communicate to your guests with content that will motivate them to come to your restaurant. Authenticity, recognition, personalization, and instant gratification are key.
Rather than spending money on targeting a mass audience, shifting your focus to delivering the best overall customer experience and remarketing to loyal customers will help grow your brand and business much more successfully.
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Is there any good news?
There were a lot of projections about the future of order delivery in the UBS report. And cost was an intriguing one. The common consensus is that cooking at home is cheaper, but as digital delivery gets more efficient with dark kitchens and robots (sounds like something out of a sci-fi movie), that common notion could change.
“Over the coming years, as the cost of restaurant-delivered food comes down, ordering-in might become 25 percent cheaper than home-prepared food (on a total cost basis), and 40 percent cheaper in a scenario where drone delivery and professional kitchen automation drive down further the cost of delivered food,” UBS researchers wrote.
In the short-term, we may expect to see consolidation among the off-premise players, potentially leaving restaurants with one or two services that will dictate terms. So, as for the fate of your customer data, regaining control over your business little by little is the most important step to take. Let's start now.