Third-Party Food Delivery Business on the Rise, But Take Warning!


The last few years has seen a dramatic increase in the use of third-party delivery services. Industry experts believe that this trend will continue with more and more vendors entering the business. Just as the use of third party services for booking hotels, air travel and rental cars expanded exponentially years ago, the third party food delivery industry will see dramatic expansion over the next decade.

According to a recent Morgan Stanley Report, over 40 percent of total restaurant sales ($220 billion) will shift to third parties by 2020, which means they’ll be using services like Grubhub, Postmates, DoorDash and UberEats.

The explosion of mobile app usage and mobile adoption in general has nearly every consumer turning to their phone for convenience and appetite satisfaction. To compete in our new tech savvy economy, many restaurants like Chipotle, Taco Bell, Panera Bread and others have already or will soon be adding online-based delivery services to their menus.

Morgan Stanley analyst John Glass says, “Delivery has become a driving force in the restaurant industry and a key investor debate,” and notes the following trends:

  • 47 percent of the 6,000 consumers surveyed used an online food delivery service in 2017
  • 43 percent of the 6,000 say it replaced a dined-in meal
  • Coffee and burger chains saw the largest increase in activity

The article goes on to explore the implications for the restaurant industry as a whole, both for Internet companies and customers.

Implications for the restaurant industry

When third-party intermediaries came on the scene nearly 20 years ago, hoteliers and airlines welcomed them as innovative new way to market their brands and increase market share. Just as the hospitality industry has learned how to embrace online airport and hotel services like Priceline, Booking.com, Hotels.com, Expedia and TripAdvisor, the restaurant industry will need to develop a blended strategy to satisfy their customers. They need to start today.

Consumers are spending more and more time and money on-the-go and online. They appreciate the ability to shop for food directly from their favorite restaurants, but also enjoy the variety a third party offers.

The dine-in revolution faces challenges with the proliferation of delivery services

As demand increases, the dine-in revolution is sure to change the restaurant industry in many ways. Perhaps the biggest challenge for major brands that use third party services will be protecting their image. Especially when they have less control over the quality and presentation of the food once it leaves their location.

Many are providing their own delivery services primarily to protect their brand and maintain the proper level of customer service from end-to-end. Others, especially smaller, local restaurants are choosing to work with third-party delivery companies to help meet consumer demand and save on the costs of developing and maintaining their own services.

However, doing so places them in a situation that could have them scrambling to repair their reputation and brand from issues like:

  • Rude delivery drivers
  • Lack of control over how/when deliveries happen – even late deliveries or missed deliveries
  • Lack of control over how updates about delivery status and ETA are communicated to customer

Let’s hope the restaurant industry learns a lesson from the hospitality industry (hotel, airlines, car rental), and take note of the lessons learned from shifting strategy to rely heavily on third-party companies like Priceline, Orbitz and others. As Megan Leonhardt reports in this Money article, the hospitality industry is also facing damages to their overall reputation by companies posing to represent the hotel chain directly, only to find out they are dealing with a bogus online company.

These fraudulent companies have become masters at hijacking unwary consumers with site names that sound like the real thing, when in actuality the consumer can end up shelling out money to an online thief and show up at their intended location with no room at the inn. Megan reports that “almost one in four American travelers reported booking on what they thought was a hotel website, only to find later it was another site.”

If that trend passes to the third party delivery service industry, there could be a large increase in unhappy and hungry consumers who send their money to a bogus third party delivery service and the doorbell never rings.

Is your restaurant strategizing how it will scale to support consumer demand for delivery while maintaining the quality you’re known for? We’re working with big brands to make sure customers know exactly when to expect their delivery and to create a completely branded experience every step of the way. Tell us in the comments, how are you keeping your customers engaged with your brand during food deliveries?




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