A Look into the Growth of Online Ordering and Food Delivery
The food industry has gone through a significant revolution over the recent past. Customers can now easily order food online and have it delivered to their homes within the shortest time possible. In fact, the growth rate for online food ordering and restaurant delivery has been over 20% over the last five years. Although the estimates differ across locations, online food delivery rates are expected to grow to more than $220 billion by 2025. This translates to about 40% of the total restaurant sales.
With all the changes that have occurred in the food ordering and delivery sectors, restaurants need to stay abreast of what is happening in the market. This is also a good time to identify new opportunities in the market and invest in the right sector of the industry. The numbers do not lie as the growth in online ordering and delivery of foods has grown tremendously. In terms of percentage, about 42% of the overall food ordering market are now being placed online. Collectively, the annual growth rate of the food industry is about 3.7%, with the online ordering and food delivering growing at an annual rate of about 15-20%.
The Rise of Food Delivery Businesses
Following the changes that have occurred in the food delivery business, more than half of all customer orders are being delivered directly from restaurants’ apps or websites. Restaurants and other food businesses are now handling digital ordering and delivery of food in different ways. While some do it themselves through independent platforms, there has been a significant increase in third-party platforms like Uber Eats and Delivery Hero. Hybrid delivery platforms are also eating part of the market share, transforming how ordered food is delivered.
Food delivery has become a business on its own with various online platforms competing to secure a market share. Although these online platforms attract huge investment and high valuation, they are transforming the business of food delivery. The most common type of food delivery has always been the traditional restaurant model. Under this model, a customer walks into a restaurant and places their order. They then wait for the restaurant to meet the order and bring the food at their table or at the checkout center.
The rise of digital technology has transformed the food delivery process and reshaped the market. Instead of going to the restaurant, customers are now placing their orders via restaurant apps and websites. For their part, restaurant’s assure transparency and convenience in their services. Once the order had been placed online, the restaurant fulfills it by ensuring the food is delivered to the customer’s home.
Change in Food Business Models
Part of the reason for the growth of online ordering and food delivery is a change in the business model being adopted by restaurants. Over recent years, restaurant delivery models have become a norm with several fleet types emerging. This includes same-hour or same-day delivery, party delivery, next day delivery, and more. There is also growth in single fleet models, multi-fleets, in-house fleets, and crowd-based fleets. Other delivery models that have emerged include curbside pickup, delivery from store, and delivery from robotic warehouses.
The change and introduction of new business models continue to shape the food delivery web. New features are being introduced include cloud kitchen, aggregator, loyalty apps, restaurant apps, delivery apps, and more. With this new industry disruption, customers are now being attracted to businesses by service convenience. As more solutions and features are being introduced in this market space, businesses are also facing the drawback of oversaturation.
Customers have a wide range of choices to choose from, which has segmented the demand into defined boxes. When shopping for food, customers are now more specific. While some want the reassurance of experience, others are more concerned about affordability and speed of delivery.
Change in Consumer Preferences
The changing consumer preferences have also contributed to the growth of online ordering and food delivery. Following the rise of a digital age, people are now customers to doing everything online, including ordering their food. The use of mobile apps to make online orders for food is slowly becoming a norm among restaurant customers. Given that customer retention is the single most important factor in the success of a food business, restaurants and other businesses are adapting to the changing consumer preference to stay in business.
Customers are intrigued by the idea of online food ordering via their phones and having it delivered to their doorsteps. One no longer needs to go get food from a restaurant, especially when it is raining, cold, or hot outside. The online food delivery market is comprised of a diner demographic that is pressed for time due to their fast-paced schedules. The major segments include the millennials and high-income households. In fact, more than 70% of online orders and at-home delivery services comprise of customers between the ages of 21 and 36 years of age.
The realization of the changing customer preferences has forced restaurant to respond and take the necessary actions to meet the changing demand. About 37% of restaurants in the world are more offering online ordering services, while 32% are now accepting mobile payments. The growth of delivery platforms has the option to deliver food easier and more convenient for both customers and restaurants. Using mobile apps, websites, and text messages, more customers are persuaded to try the order and delivery option.
In line with changing customer preferences, food businesses are changing their business models in multiple ways. Restaurants that lack in-house delivery capabilities are relying on third-party partners to bridge the gap. The third-party businesses are leveraging packaging technology to assure food quality and portability. This has also led to an increase in the off-premises dining experience and rise of virtual restaurants. As more of these restaurants emerge, customers are finding it extremely easy to order food using restaurant apps and get it delivered at their location.
Digital Age Culture Driving the Growth
The growth of online ordering and food delivery can largely be attributed to the digital age culture. Millennials and Gen Zers are accustomed to ordering most of their products online and waiting for their delivery. As more people in these and older generations jump into the online orders and food delivery bandwagon, the market size continues to increase. Businesses are realizing the evolution and adjusting according to the market. Consequently, more players are entering this food industry segment bring new trends.
Some of the notable online ordering trends include orders by tweets, smartwatches, television screens, virtual assistants, and cars. As more innovations are being introduced in the eCommerce industry, so are they integrated by food businesses in their platforms. Similar pace in innovations is also being experienced in the food delivery segment. Apart from the traditional approach of delivery by a person, innovative delivery options like pizza drones, robots, and parachutes have secured their place in this segment.
What the Growth Means
The continued growth of online ordering and food delivery means improved service delivery on the part of the customers. Customers can order whatever food they like online and have it delivered at their location of choice. For businesses, this means increased competition. Restaurants and other food businesses need to become more creative in their choice of services and what they offer their customers. Although technology has improved how food is ordered and delivered, it has created a level playing field for businesses. Underdogs in this industry can compete effectively with experienced businesses by operating virtual kitchens. With more innovations and growth expected in the future, the food industry is going to be an interesting space to watch.