Report: Future of food delivery platforms

The future of online food ordering portals. marketplace are a very important business partner of many restaurants, which means that their way of operation affects the financial condition of the premises

Food delivery platforms are a very important business partner of many restaurants. Any given platform’s method of operation affects the financial prosperity of restaurant establishments.

In this article, you will find out how much platforms earn per user and who uses their services most often. We’ll show you whether the platforms can become a 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. By 2024, the number of users will grow to 965.8 million! Although the industry is currently doing very well, forecasts indicate that its profitability is expected to decline over the coming years.

The Platform-to-Consumer Delivery segment is expected to show revenue growth of 12.5% in 2021. In the following years, however, it will decline systematically, so in 2024 the revenue growth rate will be seven times lower – only 4.7%. Its slowdown may be related to the decline in demand for food delivery services 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 the fragmentation of the market, may also have a considerable impact on the declining revenue growth rate. This is because platforms fight for customer attention not only among themselves but also with many other restaurants (not cooperating with portals) that have introduced a delivery service during the pandemic.

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 between 5 and 38 million dollars. These 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 popular practices. 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, the owners of platforms in China, the United States, India, and Great Britain can 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). This is set to remain stable in the coming years. For comparison, in the UK – Europe’s largest market for online food ordering platforms – ARPU is around USD 179. In Germany it is USD 86, in Italy USD 83, and in Poland, it is only USD 62.

Who orders food online?

The largest group ordering food online are 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, the millennial generation – people born in the 1980s and 1990s – 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 with delivery?

People born in the 1980s and 90s love 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 for millennials ordering food for delivery. Young people are less inclined to call a restaurant or use a website.

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

Portals spend huge sums of money on marketing activities. Their advertisements can be seen on YouTube, Facebook, Google, Instagram, TV and billboards. Restaurants that want to coax millennials to their sales channels face a difficult task. However, this is not a fight doomed to failure. Several methods are known to help increase sales through a restaurant website. If you want to know them all, be sure to read our previous post.

Ways to grow

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

The concept of “dark kitchen” or “cloud kitchen” can help them with that. This is a common space used by several restaurants to fulfil orders placed online. This new work model cuts costs significantly (lower rent and operating costs), making it possible to offer competitive prices. It also allows the maximum use of kitchen space. Moreover, 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 in Europe, at the end of 2020, it will amount to 400 million dollars.

According to the data provided by 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 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 growing number of cooking enthusiasts can disrupt this plan. 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 they now cook more than before the epidemic, and 51% said they plan to prepare more dishes at home after returning to “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 a scenario where food delivery platforms become a direct competition to restaurant premises possible?

It is quite likely.

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

The Deliveroo company, operating on the market since 2013, is seriously considering opening its own chain of restaurants. It has allocated EUR 5 million for this purpose. At the same time, Deliveroo will continue cooperating with other representatives of the food service industry, 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 also start building its own chain of restaurants.

Platforms vs restaurants

Some of the restaurants cooperating with portals can find themselves in a difficult situation. Until now, they have been able to advertise their premises, for example, 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 promoting their own brand at the expense of others in their database. As a result, some restaurants may end their cooperation and focus on expanding their own sales channels.

Integration of orders from portals

The financial prosperity 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 simultaneously.

That’s where we come into play!

Papu.io is a 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 meet each other at 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 for delivery.

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