Ordering In: The Rise of Tech-Enabled Food Delivery

As a kid, ordering in always brought about unneeded arguments amongst my family. I remember my parents saying “we can go pick up the food, but only if one of you calls the restaurant”. Being the shy middle schoolers my siblings and I once were, neither me nor my brother and sister would ever want to call. We ordered out in the first place due to our collective exhaustion, so to hop on the phone and list off each of my family member’s meals became this unnecessarily daunting task that never appealed to my middle school self. A solution to this middle schooler’s resounding, family-tension causing problem though… Food delivery services

Food deliveries have become a new social habit in 2021. Dinner plans now look a little more like this. Look up your favorite restaurant on an app, like UberEats or DoorDash, place an order, track it on the map, grab it from your doorstep, and voilá, dinner delivered. Technology has removed the complication – of social interaction, road hurdles, and in person payment – to give my exhausted younger self an easy means of acquiring meals, and by the time COVID-19 came around, food delivery services (and the subsequent ease of acquiring food) skyrocketed the industry.

The last few years demonstrated an incredible boom for delivery services across the US and beyond, with businesses such as DoorDash, GrubHub, and Uber Eats opening up new revenue streams for “partnered” restaurants. By the end of 2020, food delivery spending had more than doubled compared to 2019, compared to spending at restaurants that took a downward turn of roughly 5% (see image below). Sales for the U.S. food-delivery business estimated about $51 billion last year, increasing by $28 billion from 2019, according to the WSJ. Through the use of credit-card, geolocation and restaurant-listings data, they found that about $19 billion, or around 70%, of last year’s growth, was “purely due to the pandemic” and if the pandemic hadn’t happened, “sales growth in 2020 would have decelerated by over half compared with the prior year”. Taking these statistics as a whole, last year’s growth emerged largely due to consumers opting for delivery as opposed to in-restaurant dining.The pandemic instigated a change of behavior overnight; however, the question remains though of where do we see the food delivery industry going? 

New opportunities and untapped revenue pools

‘Autonomous Food Delivery’

As the way people eat continues to evolve, autonomous food delivery offers a new revenue pool for companies (looking to capitalize on more fixed costs as opposed to variable ones). Businesses expect greater societal acceptance of autonomous tech as the demand for delivery continues to increase rapidly, and the trends seem to be sticky even as lockdowns come and go. One Silicon Valley start-up taking advantage of the newly forming avenue is Nuro, a  California-based startup creating electric autonomous vehicles to deliver goods from stores to customers’ homes.

As of November 2021, the self-driving startup has already partnered with Domino’s to deliver fresh pizzas, CVS for prescription deliveries, and Walmart for grocery delivery all in the Houston area. Nuro’s main vehicle, the R2, features 360° cameras, Lidar, short and long-range radar, and ultrasonic sensors in order to safely operate on public roads while ultimately, easing the consumer need for in-person errands. The electric self-driving R2 vehicle also relies on artificial intelligence and an array of equipment to guide it on the streets. Because there are no passengers or steering equipment as well, the vehicle holds less weight than a typical delivery car, but continues to operate at or under 25 mph for safety purposes. Nuro offers companies greater cost-effectiveness for last mile delivery that may be beneficial long term

However, self-driving vehicles still have a long way to go when it comes to changing the public perception of their presence on the road. At this point, a loss for any competitor in the autonomous vehicle industry is a loss for everyone. There is a long road ahead before they become mainstream, but possible potential still remains. 

‘Menu engineering’

Menu engineering can create further revenue streams for food delivery, as well, through offering various data-organization programs. Capitalizing on the data generated through delivery platforms, restaurants can formulate custom menus for each consumer, and subsequently increase opportunistic sales, total order value, and conversion rates. Menu engineering categorizes menu items based on their popularity (sales volume) and profitability, and can extract real value from the customers if executed efficiently. It can allow for customization on the customers end while also offering mitigation of unpopular preferences on the restaurants end. End-to-end customization not only ensures consumer preferences (i.e. food allergies or sensitivities) are taken into account, but also secures more accurate food and meal recommendations. Sometimes the most powerful marketing tool a restaurant holds lies within their menu. Therefore, a thoughtfully designed and customized menu can advertise a restaurant’s offerings, boost brand awareness, and increase overall profits of the business.

While the future of food delivery still remains unclear, there is no question technology will remain a fundamental part of the industry going forward. 

To finish off the blog and spark thoughts for potential comments, here are a few questions to consider:

  1. In the upcoming years, how do you see the food delivery industry getting disrupted by technology?
  2. Do we see Amazon breaking into food delivery (beyond their current grocery delivery service)?
  3. What concerns do you have regarding Nuro’s current operational model?

13 comments

  1. I hope that Nuro is something that they look to expand into other areas in the United States. I see it as a massive milestone in validating different autonomous vehicles use cases. As for ordering delivery or for pick up, a feature I’ve noticed but never used through the Chipotle application is the ‘Group Order’ option. This allows you to send a group order link out, and everyone adds in their order. I’m assuming more apps are starting to incorporate this feature to increase consumer satisfaction.

  2. Nice post! Got a question for you: do you think that Nuro is better than dron-based deliveries?
    I completely agree with you, huge growth and opportunities in this industry. I never used the Chiptole but will definitely try it.

  3. I will admit I ordered a lot of delivery early in the pandemic to “support restaurants” when it really was the easy use of apps and laziness. I think you make a great point about menu engineering – collecting data and updating menus to improve revenue is a transformational component. I am interested to follow how restaurants use technology to overcome the labor shortage right now. Autonomous vehicles for delivery are still in the early stages (as you mentioned) and I sense that it is inevitable.

  4. I am guilty of using deliver apps for food a lot more during the pandemic. I also saw the new trend of alcohol delivery. I think this was a great idea! It keeps many people safe – especially those who drive out drunk to buy more alcohol. However, one thing I have heard is that using food delivery apps takes away money from the restaurants as they take a cut, so its better for the restaurants if you order through them directly. I have seen a lot more restaurants providing their own delivery services now too.

  5. This one of those cases where I think that the human labor element has no moat against this. There are many an issue with food deliveries and this is the next logical step. I can see Amazon breaking into this but perhaps the scale of this is too big even for them. I expect some healthy competition in this future market.

  6. While I wholeheartedly agree with your assessment of opportunities in this field, and also believe in how positive and revolutionary it has been for consumers, your opening story took me back to thinking about my childhood… I remember how hard my parents pushed to answer phones, call people directly, and do all the ordering over the phone in order to get comfortable with the human interaction. Funny enough, I think their parenting in that respect has paid off, because compared to a lot of my friends nowadays I have a much easier and more comfortable time on the phone and making that connection if necessary. It just makes me think if future generations will have a harder time with it, since almost all interaction is just directly through apps now and more industries are trending that way.

  7. I believe none of these food delivery companies have achieved profitability. Perhaps fleets of autonomous delivery vehicles can solve this, but I haven’t seen any literature arguing for this. I think a merger between the largest companies is inevitable in the short term if they have any hopes of becoming profitable.

  8. Really interesting post, Shannon! I personally love food delivery, due to the efficiency, convenience, and – frankly – the lack of human interaction.

    In the upcoming years, I think that the food delivery industry’s disruption by technology may plateau a bit. You mentioned how 2020 was predicted to have a decline in food delivery and that it was the pandemic that ‘saved’ the food delivery industry. I think the planned decline indicates that the innovation has arrived. I don’t think autonomous vehicles are going to be a part of life in the near future, given the safety concerns and regulations tied thereto, and I think driving people/replacing people for bigger ticket items (like mega truck shipments) are going to be where the innovation takes place initially.

    I do not see Amazon breaking into food delivery (beyond their current grocery delivery service). Restaurants are a notoriously tough business and delivery in conjunction with this does not seem to be on the scale that Amazon operates. I also don’t think there’s a big enough need. Stick with the groceries, Amazon.

  9. Nice post. Remind me, did you get to go to Nuro when we went to SF, or was that when Riley had to meet us offsite because of the pandemic?

    1. I was part of the group when Riley came to us in the hotel…bummer we didn’t get to see the office, but glad we still heard from Riley!

  10. Great post! When you mentioned menu engineering it immediately made me think of how this can help eliminate food waste!

    I had not heard of Nuro so it was really interesting to learn about a new technology within the food delivery services. I do think there will be a lot of innovations taking place within this sector in the upcoming years. As for Amazon entering this market – I’m not too sure! Part of me thinks it will just because Amazon has dominated most industries but I echo Lexi’s comment and think Amazon might sit this one out.

  11. Great post Shannon! Nuro sounds really cool! In regards to your questions, I can see Amazon getting into the food delivery industry, once they find a way to securely profit from it. Currently there are so many competitors and none of them are making a real profit or securing a solid competitive advantage. If Amazon can somehow manage that, then I think they can really dominate in the market.

  12. Super cool post, I had no idea there was autonomous food delivery available. Perhaps they can use drones for this too ?! My first job in high school was to deliver food from a number of local restaurants who utilized a 3rd party service to coordinate deliveries as opposed to hiring their own drivers. At that time everything was handled via a phone operator and there were often miscalculations in funding which ultimately led to the service’s downfall. I can’t help but look back at that time and kick myself for not realizing the potential to automate the service.

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