9 January, 2020
According to NPD, number of restaurant visits reserved and paid via smartphone in the US increased by 50% from 2017 to 2018. By implementing a mobile food delivery application, businesses can reach new audiences and process more orders. And companies like Starbucks are proof of that — their Mobile and Pay app is responsible for 13% of annual US transactions, bringing in massive amounts of money.
Some business owners decide to pursue food delivery as their main specialty, creating mobile delivery startups. Such apps aggregate offers from restaurants nearby and offer a cheap or free delivery, sharing profit with a restaurant for each order. It’s a viable business model that works on its own, not just as a bonus.
Mobile technologies become increasingly more affordable, and businesses can afford a custom mobile app at their early stages of growth. It creates a versatile market of mobile food delivery services, dividing all businesses into two types.
This business model describes an app for multi food delivery that’s owned by a restaurant or a fast-food establishment. A company can use the app for customer attraction and retention, creating another channel of bringing in profits. There are two common ways of applying this model:
Integrating an online delivery feature into an existing company’s website as an additional service, as done by Dominos.
These businesses use mobile delivery as a way to scale and reach for more clients. They prepare meals and handle logistics, taking full responsibility for the process.
In this case, a customer uses a third-party application that aggregates offers from the local restaurants, offers custom discounts, and meal delivery with no or small fees.
Some platforms work as aggregators — they don’t handle delivery operations, as the responsibility is on the restaurant that provides the meal — for instance, Grubhub.
Recently we’ve seen a relatively new delivery business model with complex services that handle logistics and fully pay for transportation, like UberEats.
The first type of platform-to-customer delivery service is easier to implement — the company doesn’t have to invest in vehicles or drivers. However, the newer type of cooperation allows companies to have more control over their services and achieve much higher customer satisfaction — although it’s an approach with a much higher cost.
Just like third-party platforms, restaurants have huge untapped possibilities of online food delivery. The growth of Domino’s digital strategy over the last five years shows that there is a lot of potential scaling opportunities.
Domino’s was the first e-commerce food company. Their digital strategy described the company as an “e-commerce company that happens to sell pizza.” Their choice to emphasize online aspects of the business rather than taking a typical restaurant route led to an annual revenue increase of $34.8 million, as of the third quarter of 2019.
Dominos is a great example of how implementing innovation early on can make a difference in the market. In 2007, the company was among the first ones to release mobile food ordering app. Over the years, the service has grown exponentially, acquiring additional services like Pizza Profile, Pizza Tracker, and Pizza Builder. These features provided an additional level of customization, allowing users to change their orders right in the app in a simple interactive fashion.
The company didn’t stop on this achievement — in 2014, the team rolled out the voice-based feature for pizza delivery. Additionally, Domino’s allows leaving a tweet or a Facebook text to make an order, making the process of ordering a pizza fast and simple. The company integrated emoji-based order algorithms — the user could order a pizza by tweeting a pizza emoji — completely minimizing the hassle of time-consuming registration and order creation.
To successfully conquer the online delivery market, businesses have to understand their target audience. Their demographic data and behavioral habits determine the style of marketing activities, user interface, and help to develop the right functionality.
In the United States, the average online food delivery customers are men, while women make about 45% of all orders, from 25 to 34 years old with high-income levels. This is surely a promising profile — online food delivery targets a young and well-off audience with a skyrocketing buying potential.
This means that even by conquering a small market share, the company can bring a significant profit increase by managing to retain clients long-term. They have enough resources to make orders on a regular basis — the company, however, needs to work on creating a personalized and interactive experience.
As for the global user penetration rate, the highest global possibilities are presented in China. The country has a penetration rate of 34.2% — almost a third of its huge population uses online delivery services. The Chinese market is followed by the Netherlands and UK, right after them — the United States and Canada. These five markets present the largest scaling possibilities for global food delivery brands.
To know how exactly a mobile delivery app can drive profit increase to your company, it’s crucial to understand the key points of the customer journey. Each of these interactions can either motivate a client to complete an order or become an obstacle to conversion.
There are different reasons for users to choose a particular type of service. Consumers use aggregation services to get access to multiple menus simultaneously — in this case, the reputation of app partners and feed usability is the key to success.
Food delivery services provide a geolocation-based search — users can browse offers from restaurants nearby, get details on meal price, track their orders in real-time, and even receive time estimates on average delivery time. Customers want their platform to be fast — the speed is reported to be a key selection factor for most American online-delivery consumers.
Food delivery apps need to enable user registration — this way, a customer has access to a personal profile with full purchase history. The service can use this data to form custom menus and distribute information about special offers. Additionally, the company can provide coupons to improve client loyalty.
Develop an app for multi food delivery that provides a variety of supported payment methods, including PayPal and Payoneer. Also, a customer should have the option to cancel the order before it was confirmed.
Using GPS-tracking and Internet of Things technology, businesses can communicate the progress of food delivery to their clients. The objective here is to reduce waiting time and keep the customer informed about the transportation of the order. Additionally, the company should have a support agent who is ready to provide data on the order state anytime.
The combination of these four factors determines the company’s success in attracting and retaining customers. The first step is to understand what kind of business model you prefer — and what its clients expect from the service. Then, you need to build a comfortable feed, provide users with answers to questions, feedback, and ratings. Lastly, the company needs to deliver what was promised, which is a fast and transparent transportation experience.
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Online delivery companies don’t limit themselves to provide basic possibilities, described above. They also strive to disrupt the market with innovative technologies, acknowledging the rapid growth of competition. In-house and third-party delivery compete against each other, and companies need to look for new ways of optimizing their activities.
Let’s take a look at how modern technology helps to stand out from the competition and assists in conquering a market share.
Data-driven UX/UI. User experience will be deeply personalized — each visitor will see a different menu, according to particular preferences. Food delivery services can benefit from Netflix’s approach — the streaming platform complies custom watchlists based on their previous history. Similarly, food delivery apps can study food order history of a particular user and push relevant offers.
Self-driving vehicles and delivery automation. Uber already introduced self-driving vehicles into their services, and it’s only natural that it will implement those into the food delivery service in a couple of years. Dominos already created a delivery drone along with a transportation robot, and there is likely more automation to come in the upcoming years.
Drones. Ele.me, a Chinese food delivery company, uses drones to deliver food in Shanghai. So far, it’s only a pilot project, but it’s clear that drone transportation has a chance to become a global delivery tendency.
Smart assistants. Users profit from the possibilities of Alexa and Amazon Echo, using these assistants to look for food delivery services. Businesses can profit from this niche and implement custom extensions for smart home assistants.
Voice recognition. To make an order, it will be enough for a user to give a couple of vocal commands — the software will process them into delivery details.
IoT tracking. Companies can use sensors to manage and track food packages. Also, the customers will be able to see full information on an ordered meal and track their delivery in detail. IoT promotes trust and transparency, helping brands build a long-term relationship with a client.
Looking at recent disruptive food delivery solutions, it’s apparent that the majority of buzz innovations can be successfully brought to the market. Brands can use these technologies as competitive advantages as well as significantly improve the quality of their services.
Even though the online food delivery market is taking over traditional methods, the majority of orders is still placed via a phone call. However, looking at the growth of online-based delivery companies, it’s safe to assume that this tendency will not hold long.
So far, the market is characterized by low user penetration — there are still a lot of potential customers who don’t actively use existing solutions. This means new companies can target these unbiased users and build their following.
The market is expected to develop faster in highly populated cities and capitals. However, in five years small local markets will continue growing as well, just at a less impressive pace.
For several years, GrubHub was the most successful player in the industry. The application became successful due to its high market penetration and great user experience. The company is still the largest food delivery service — according to Zion&Zion research, the app is used by 37% of all food delivery apps/websites users.
However, Uber Eats is the fastest-growing food delivery company — in fact, it’s just 1% behind Grubhub, with a market share of 36%. In 2018, UberEats grew by more than 230% — faster than any other solution on the market.
Other significant market players include Amazon Restaurants — its popularity increased tremendously after uniting with Olo — another leading online food delivery service. In the Restaurant-to-Customer niche, the main competitor is still Dominos, with competition from Starbucks.
The online food delivery market’s rise is a global phenomenon, by no means limited only to American users. Chinese startups have drastically grown over the course of last year and received support from major e-commerce companies.
For instance, the leader of the Chinese market, Ele, backed up by Alibaba, is a major online shopping platform. This is, actually, another option for bringing profits to your business with an online delivery service. Food delivery companies are attractive to major industry players, and Ele in China, as well as Olo in the US, prove this tendency.
EU providers aren’t limited to one country and cover large audiences and tend to scale rather rapidly. Companies like Delivery Hero or Just Eat, which don’t have that much traction in the US, are the leading players in Europe.
The online food delivery market is full of potential, and it’s only natural that it attracts multiple companies of all sizes — from big corporations to small startups. Statistics on user penetration suggest that there might be a sweet spot for anyone — however, beginning companies must be ready to face difficulties.
The easiest and cheapest way to find your place on the market is to choose a narrow niche. Of course, it limits the number of potential uses, but it also allows you to provide a unique offer. Take a look at some positioning examples — we encourage you to come up with your own, too.
Delivering food to college students — business can take food related questions off the students' shoulders, and thus enhance their academic performance;
Quick and healthy package — the company can position itself to deliver healthy fast food, something that’s convenient to eat but also good for health;
Custom-made sweet snacks — you don’t have to necessarily approach big restaurants — how about starting to work with hand-made companies that provide a premium gastronomic experience? You can cooperate with small businesses and promote their products for a fee.
You can penetrate into different niches after your product has outgrown the segment. However, it’s good to start small — this way, you will provide services that big competition overlooks.
The food delivery service should include a user version, an admin panel with real-time order data, and a personnel edition — the pocket manager for couriers. You need to connect a database with available offers and integrate GPS API to collect offers nearby and track the order's transportation. Backend and frontend version of the app should be connected — a business owner should see the data, entered by a courier and user to synchronize the two, as well as the user should be able to receive courier’s updates in real-time.
If the platform aggregates offers from local restaurants, the application should allow them to add custom photos, menus, special offers, and an approximate delivery hour. A restaurant owner should be able to see clear statistics and manage the data independently.
The restaurant manager should be able to preview the order and control the received payment. Also, they should be able to edit time of delivery in case there is an emergency — and the service should send an immediate notification to the user. This communication between customer and restaurants lies at the core of lasting user experience since restaurants take the most responsibility for the order.
An online food delivery service is a long-term investment, and you need to find a reliable technical partner, not a one-time contractor. The software development company should be able to provide you with long-term development services and post-release maintenance.
Make sure that the company’s methodology fits your project’s needs. For such a complex project, we recommend to use Lean or Agile — these systems rely on continuous testing and regular communication.
The partner should be transparent about coding practices, risks, and expenses. The team should provide the company with time reports, project progress analysis, and threats evaluation before the start of the project.
The development team should be capable of creating a cross-platform application, adapted to Android, iOS, tablets, and web browsers.
An online food delivery service requires a development team to have creative vision and understand the business area. This industry is incredibly dynamic, with many high-tech competitors, so it’s important to make sure that the team knows the specifics of how to build an app for multi food delivery.
At Arounda.agency, we use user insights to develop online food delivery platforms. First, we build and test the essential functionality and design — we create an MVP for the project. Beta testers start exploring the functionality — our team analyzes their behavior and feedback and makes improvements.
In the food delivery market, where personalization is a must, user insights are the only way to know how to offer the best experience. We make sure that each user sees meals that correspond to their preferences and take online habits into account. Similarly, we test the personnel and admin’s version. If there are restaurant partners, we collect their feedback. These insights serve as the basis for continuous improvements — we constantly work on updating and implementing new features.
The online food delivery market offers countless possibilities to business owners and those who own a restaurant or consider creating a standalone delivery service instead. The market is open to new business models and innovations: companies can explore new niches and segments and learn from tech-savvy competitors like Uber or Amazon.
The key to succeeding in the market as a new player is by determining the right positioning and executing your vision in a responsive application. If you have an idea for a service in mind, send us a request and our team will prepare a detailed estimate for the project.
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