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