Food Delivery Apps: The age of ease and access, from restaurants and supermarkets to the impacts of COVID-19
Uber Eats and Deliveroo have impacted the way we eat since 2013, making it easier for us to get whatever food we want. Uber Eats is valued at $20 Billion and will only continue growing with the age of home living due to the corona virus. As troubled as these times are there are many opportunities for these companies to capitalize on and expand their empire.
The success of these apps is attributed to the idea that we are getting things for free or cheaper, through use of friend codes and vouchers. Giving the idea that we are saving money in comparison to eating out. The constant stream of new discount codes via email or social media ensures the constant use of the apps, Uber Eats in 2019 boasted 21 million monthly users. The loyal customer base shows that these codes keep people coming back. To take advantage of this time when people are stuck at home on their phones, these companies should expand their advertising and keep up with current events such as Halloween for themed discounts.
As much as these delivery companies support restaurants (Uber Eats supports 500,000) there is a disadvantage for those smaller restaurants and chains that cannot stand up against larger more well-known places. With apps taking around 20–35% commission from restaurants it is harder for smaller restaurants to make profit with margins around 2–10%. These small profit margins lead to a slow erasure of local businesses and food outlets which then eventually reduces the selection on such apps and therefore impacts their later revenue. These apps should help promote more of the smaller companies to ensure their livelihood.
Deliveroo are partnered with 100,000 restaurants such as Wagamama’s and Nando’s, both already huge multimillion companies. Wagamama’s was bought for £559 million back in 2018 and thanks to growth of Deliveroo has only become bigger. Securing such restaurants offers these apps a whole new customer base as people know what they are getting when they order from such big brands. With hundreds of reviews already about specific restaurants and the chain it adds a new layer of credibility and trust to these apps. Signing on with restaurants such as these are the best opportunities that these apps have and they can secure these partnerships through shared gains, of promotion on these apps and shared customers.
Issues with delivery are hard to overcome, when an order is missed the money comes out of the restaurant and the delivery app. With numbers of users going up the number of complaints and issues will go up proportionally, with 70% of frequent customers saying they have required to use customer services. Issues can result in the gift of free credit or a refund as 93% of people expect issues to be resolved in less than 10 minutes. This increase in complaint numbers places strain on the customer services which must be expanded, many of which are online and automated chats. Improving the AI behind these chats or increasing number of people monitoring these chats must be top priority if these apps are stay popular and trusted.
During the age of COVID-19, Deliveroo partnered with many supermarkets such as Aldi. This has been one of the biggest changes Deliveroo has made, no longer are they simply bringing pre-prepared food to people’s doors but are helping the online shopping crisis. Deliveroo have made the most of this opportunity and gap in service by providing small food parcels worth £25 to vulnerable individuals such as elderly shoppers. Whilst offering a slightly reduced range of products from Aldi, Deliveroo still offers 150 products and can have them delivered in 30 minutes showing that they can use their already existent infrastructure and advertising to mold themselves to current needs and gaps in the market.
Corona Virus has raised challenges and opportunities for this sector, the new age of home-living especially with the second lockdown in England has brought on different behaviours in use of food delivery services. An increase in delivery frequency as big as 60% has been seen in 18–34-year old's. This is a great opportunity for each of these apps to expand and make more money, but there is more competition within this sector as each app is fighting for their fair share of the money, with Uber Eats controlling 29% of the global food delivery market. The way each app advertises themselves to this generation will ensure who capitalizes on this opportunity and the incentives these apps use such as discounts may be a deciding factor.
One of the challenges Corona Virus has raised is that many people cannot work, resulting in a reduced income and more time to cook. These factors affect people’s ability and desire to use such apps. Ordering off these apps is more expensive than home cooking and so app usage may fall as people are only able to do this a rare treat and the idea of this becomes much more of a luxury. There has been a net decrease in both frequency and spending on delivery apps within the UK, this challenge is the hardest to overcome as it is out of the companies hands, if people do not have the money to spend they cannot be ordering off these apps.
One challenge that is yet to be overcome is the age and generation gap in the usage of these apps. The lack of older generations using these apps is a key downfall in the profit that these companies could be making. 51% of baby boomers (55–73 years old) are not ordering as often as they would like. This may be due to a lack of digital knowledge and access to these apps depending on which phones they have. Marketing themselves properly towards these groups would offer a great opportunity but getting them initially onboard via email or other means may be the biggest hurdle to overcome.
Altogether this sector has a huge impact on the economy and is digitally driven through apps and online communication, as 60% of orders are through apps. At the moment it is a suffering due to COVID-19 but it is still growing with a predicted industry value of $200 billion in the future.
