Report: Future of food delivery platforms - Papu.io

Report: Future of food delivery platforms

Food delivery platforms are a very important business partner of many restaurants. That means that their way of operation affects the financial condition of gastronomic establishments.

Find out how much they earn on one user and who uses their services most often. Check whether the platforms can become direct competition for restaurants and how their functioning will change in the next few years.

It is estimated that around 700 million people worldwide use food delivery platforms. To 2024 the number of users will grow to 965.8 million! Although the industry is doing very well at the moment, forecasts indicate that its profitability is expected to decline in the coming years.

The Platform-to-Consumer Delivery segment is expected to show a revenue growth of 12.5% in 2021. In the following years, however, it will decline systematically, so in 2024 revenue growth rate will be 7 times lower – only 4.7%. Its slowdown may be related to the decline in demand for the food delivery service in certain markets during the epidemic. According to Earnest Research, since February, there has been a reduction in spending on Ubereats, DoorDash, Postmates, and Grubhub.

Increasing competition, which leads to fragmentation of the market, may also have a large impact on the declining revenue growth rate. The platforms fight for the customer’s attention not only among themselves but also with many other restaurants (not cooperating with portals) that have introduced a delivery service during the epidemic.

Growing competition

In 2019, over € 1.6 billion was invested in European food logistics companies. Most of this funding went to Deliveroo – $ 523 million, Glovo – $ 319 million, and Wolt – $ 118 million. Smaller businesses were also supported. Keatz, Taster, Mathem, and Crips raised from 5 to 38 million dollars. The numbers are impressive!

In the platform-to-consumer delivery market, there is one rule: “the winner takes all”. Smaller companies that do not have the money for extensive marketing activities can become the prey of big players who buy their shares and thus expand their customer base.

Mergers of large enterprises operating in separate markets are also a popular practice. In 2020, the Dutch company Takeaway acquired the British company Just Eat.

Together, in early 2021, they will join forces with the American giant – Grubhub, for a total of 7.3 billion dollars. Integrated companies will create the largest (apart from Chinese enterprises) food delivery company, operating in 25 markets around the world.

 How much revenue does one platform user generate per month?

According to statista.com data, the owners of platforms in China, the United States, India, and Great Britaincan count on the highest earnings. The average revenue per user of the platform (ARPU) in 2020 is around 100$ per month (averaging the values from global markets). It is to remain at a similar level in the coming years. For comparison, in the UK – Europe’s largest market for online food ordering platforms – ARPU is around 179 USD. In Germany, 86 USD, in Italy, 83 USD, and in Poland, it is only 62 USD.

Who orders food online?

The largest group ordering food online is people between 25 and 34 years old.

Source

Interestingly, only 22% of people who ordered were people aged 18 to 24. In the UK, the youngest group accounts for only 16%.

According to the CBRE report, it is the millennial generation – people born in the 1980s and 1990s – that currently spend the largest part of their income on food and drink – 13.1% (data from 2016). However, the increased expenses do not result from generation differences but are appropriate for a given age group. Baby boomers (born 1946 – 1964), aged 25 to 35 , spent 14.7% of their earnings on food, and generation X (1965 – 1980) 13.2%.

How do different age groups order food in delivery?

People born in the 80s and 90s love the convenience and quick solutions. Easy access to cuisines from around the world and the ability to order dishes with a few clicks, make applications and intermediary portals the most common choice of millennials ordering food in delivery. Young people less often decide to call a restaurant or use their website.

When it comes to the older age group, 46% of people over 60 declare that they are not interested in the food delivery service. Others most often call restaurants, and only 4% use the application.

Portals spend huge sums of money on marketing activities. Their advertisement appears on YouTube, Facebook, Google, Instagram, TV and billboards. Restaurants, who want to convince millennials to their sales channels, face a difficult task. However, this is not a fight doomed to failure. Several ways can help increase sales through a restaurant website. If you want to know them all, be sure to visit our previous post.

Ways to grow

Due to increasing competition and considerable costs of doing business, food delivery platforms are looking for new ways to gain a competitive advantage and reduce the costs.

The concept of “dark kitchen”, or “cloud kitchen” can help them with that.  It is a common space used by several restaurants to fulfill orders placed online. The new work model cut costs significantly (lower rent and operating costs), making it possible to offer competitive prices. It also allows the maximum use of kitchen space. Besides, the data collected by applications/portals provide information on customer preferences that can be used in subsequent marketing activities.

Future of “cloud kitchens”

The outlook for the newly created cloud kitchen market is very optimistic. It is expected that at the end of 2020, in Europe it will reach 400 million dollars.

According to the data of the UBS investment bank, its development, combined with new ways of delivering food (e.g. by drones) and the gradual automation of the process of preparing dishes, that will level the costs of preparing a meal at home and ordering it online.  According to the report, a scenario is possible in which by 2030 most courses will be ordered online.

The plan can disrupt the growing number of cooking enthusiasts. According to Mintel.com data, their number in the United States alone increased from 98 million in 2015 to around 115 million in 2017.

In a survey conducted in April 2020, 54% of respondents claimed that they now cook more than before the epidemic, and 51% said they plan to prepare more dishes at home after returning to the “normality”.

Can portals become direct competition for restaurants?

 

The cooperation of restaurants with portals has its advantages and disadvantages. Restaurants do not always see them as an ideal business partner.

However, is there a scenario where food delivery platforms become a direct competition to gastronomic premises?

There is a big chance. 

Portals have access to customer data. They know which dishes are the most popular, from where the orders usually come from, and at what time people like to order.  Besides, they have all the necessary resources: drivers, vehicles, appropriate packaging, and sometimes kitchen facilities in the form of cloud kitchens. 

The idea of establishing its restaurant chain comes from the Deliveroo company, operating on the market since 2013. It allocated EUR 5 million for this purpose. Simultaneously, Deliveroo does not resign from cooperation with other gastronomic establishments, for which it will continue to act as an intermediary.  If the British giant succeeds, it will send a clear signal to the competition, which may soon also start building their own chain of restaurant.

Platforms vs. restaurants

Some of the gastronomic establishments cooperating with portals can be put in a difficult situation. Until now, they have been able to advertise their premises, e.g. by buying advertising space on an intermediary’s website. The situation may change if portals create their own brand. The platforms will be focused on its promotion at the expense of others in their base. As a result, some restaurants may resign from cooperation and focus on expanding their own sales channels.

Integration of orders from portals

The financial condition of food delivery portals has a direct impact on the standing of their business partners. Many restaurants are contractually tied to not one but several platforms. This requires a lot of coordination on the technical side. Restaurant owners need to invest in the right POS system if they don’t want to be forced to work on 5 different tablets at the same time. 

That’s when we come into play! 

Papu.io is the system that integrates orders from portals and organizes the work of restaurants, especially those based on deliveries. Do you want to get to know us a little better? Let’s see each other on our free demo!

Summary

The forecasts for portals that mediate between the client and the restaurant look promising. The demand for their services is constantly growing. At the same time, there are more and more companies with a similar profile of activity on the market. Growing competition is associated with higher expenses for marketing activities. A way to reduce costs is the development of dark kitchens. They have the potential to completely change the rules of operation of many restaurants and popularize ordering dishes in delivery.

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