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Things To Consider When Starting A Food Delivery Business

Lilya Khimchenko

CMO

The online food delivery market is starting to reach a new peak, and it’s promised to get even better. According to Statista, this year the online food delivery market is estimated to be worth $107,438m. The annual growth rate is optimistic as well — the field is expanding by 9.9%. By 2023, experts estimate online food delivery to amount to $156,819m.

“One of the reasons why the food delivery market develops so dynamically is its relatively low entry point compared to other food-related industries. Business owners don’t face legal restrictions and don’t have to constantly request an FDA approvals.”

There is no need to own the food production line itself — delivery companies can partner with restaurants, fast food chains, and supermarkets. 

Table of Contents

Types of Online Food Delivery Businesses

The online delivery market is a relatively new field, which is why it’s one of the most tech-savvy ones. With innovation trail blazers like Uber, who are paving the way with an UberEats app, small businesses stand up against a powerful competition there. Let’s take a look at what aspects should be taken into account before a company decides to make a food delivery app.

The market is divided into two key categories: the first one is presented by experienced delivery providers called aggregators. Another type is created by innovative delivery companies that build their business models around innovative technology. Let’s take a look at each of these types to get a clear idea of the market situation. 

Aggregators

Aggregators use technology as a traditional method for user interactions and order processing. Customers can log in to the app or website and see all delivery offers in the area. Such businesses receive a commission from any deal. The actual delivery is carried out by the third-party — another delivery service, restaurant, etc. 

The service does more of an advertising job in providing food delivery services. These businesses still keep attracting investments — in 2015, Foodpanda and Delivery Hero raised more than 100 million euros. This market has four established global players — Foodpanda, Delivery Hero, Just Eat, and GrubHub. 

New approach

New food delivery providers, the same as aggregators, are also hugely based on comparison offers and aggregation algorithms. They create a food delivery apps via which delivery logistics is also handled — this allows attracting more partners because not every restaurant is ready to deal with logistical difficulties by themselves. 

Online food delivery requirements

The online delivery market’s main competitive advantages lie in the combination of the quality of available food combined with impeccable service quality. Let’s take a look at what kind of possibilities a successful online food delivery provider should offer to a user.

  • Mobile application: the majority of food delivery is done via a mobile app, although they often use a web-app or desktop client as well;

  • Simple transactions: all payment data is safely stored in the connected database

  • Customer feedback: clients can leave reviews and rate the service quality. 

Companies need to build a food delivery app supported by iOS and Android, and they should also have a web version of the service. This provides more possibilities to the end client, promoting various contact points. 

Strengths and Opportunities of the Market

The online food delivery market offers businesses a cost-efficient way to tap into large audiences. When startups create an app for food delivery, they also increase the speed of communication and reduce the costs of the delivery itself. 

Strengths

  • Millennials and Generation Z aren’t likely to cook for themselves, thus food delivery business can be regarded as a long-term investment, well-aligned with the needs of young audiences.

  • Customers do regular online delivery orders, it’s not a one-time purchase, but a lasting partnership.

  • Simplified management — having an online application makes it easy for the team to manage orders and profits.

Opportunities

  • A rapidly growing on-demand industry with huge untapped growth potential;

  • Increasing urbanization and high density of population creates a favorable environment for such a business’s development;

  • The exploration of recent marketing trends;

  • Lasting collaboration with restaurants and food retailers allow steady growth. 

The online food delivery market stems from the needs of the modern person. Its high digitalization, emphasis on mobility, and increased client loyalty attracts new customers. 

Weaknesses And Threats Of Online Food Delivery

As a new and highly competitive market, it’s only natural that online food delivery presents business owners with unique challenges. Let’s take a look at possible difficulties that business owners should be aware of, before deciding to create an online food delivery app. 

Weaknesses

  • Dependence on food providers and their cooperation;

  • Not enough control over customer service;

  • High competition levels, presented by both small businesses and international corporations. 

Threats

  • Not enough legal regulation of the field creates room for possible conflicts;

  • The market didn’t stand the test of time — new challenges might yet arise;

  • The online food delivery market is divided between third-party services and direct providers (restaurants, supermarkets, etc).

The market is still shaping, and this leaves many questions unanswered. You have to be open to experiments and risky investments if you want to become the leader of the market.

What To Take Into Account To Create A Food Delivery App

Let’s take a look at the main needs and habits of an average food delivery market user, according to McKinsey’s report.

  • Customers tend to stay on the platform. After complete signup, 80% of visitors stay on the service and complete the order. This low bounce rate (20%) is incredibly optimistic for food delivery providers. The strategy is simple — you have to encourage more people to register an account as soon as possible. 

  • Delivery speed is the most important competitive advantage. An average visitor is ready to wait not for more than an hour. 

  • Home deliveries lead to the market. Even though modern delivery providers increase marketing efforts to target workplace delivery, 82% of all orders are done from home. People still prefer to enjoy their food in their places. 

From these numbers, it’s clear that an online food delivery provider should aim to provide fast services and emphasize an intuitive interface that would make registration fast and easy. 

How to deliver

The next move is to figure out a business model for your company. Let’s take a look at the competitors and their approach to delivery. You can start an online food delivery app with one of these approaches, or blend several into a single strategy. 

  • Crowdsourced food packages. Roadie is a crowdsourced delivery company that engages other people in food delivery. Instead of hiring a part-time driver, they allow regular people to do a food delivery. Anyone who’s heading in the direction of delivery can pick up the order, and quickly get it to the customer. 

  • Grocery partnerships. Instacart is a personal shopping company that hires couriers who do shopping for clients and deliver food packages straight to their doors. In this case, the service goes beyond traditional delivery, offering shopping services as well.

  • Retail deliveries. Companies who have food shops can extend their services to door delivery. On-demand services increase customer reach and provide higher service quality. Another solution is to create a partnership with a delivery service. 

The key takeaway from this competitor analysis is that you shouldn’t rely on delivery alone — you can include additional benefits and services. These add-ons will brand your company and help to stand out from the competition. 

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The Features Of a Food Delivery App

To develop a food delivery app, companies start ideating the basic building blocks of the app. Regardless of your business model, there is a universal set of features, present in all successful food delivery apps.

Account Registration

We already saw that once a user registers in the app, it’s likely the order completion will be a success. Business owners and app developers should take these statistics into account and invest special efforts in building an intuitive registration form. 

  • Support social media registration. Users should have the opportunity to create an account with their Facebook, Google, Twitter, or Instagram accounts;

  • Collect only essential information. Don’t use registration as an opportunity to learn more about a user. Instead, you can ask for the data that you need for order processing and delivery. Credit card information should be filled after the order is at the completion stage. Limit a registration form to name, phone number and user location. 

  • Explain to a client why you need any kind of information. Keep the page transparent and informative. 

Customizable menus

Interactive food delivery apps allow customers to create personalized food sets for any kind of meal. The application remembers the user’s habits and offers suggestions with a dynamic backend.

Make sure a customer can tweak the size of the portion, drink’s temperature, and find out the number of calories. You want to provide the user with all relevant details, so it’s clear what kind of delivery to expect.

For a premium application, a user should also be able to choose a personalized packaging. The application should provide a wholesome experience of getting a food package. If that’s a special occasion, the service should take these details into account. Personalization is key to increasing the client’s loyalty. 

A flexible feed

The main page where the offers are displayed should include a search bar, a list of filters, photos, and ratings. It’s great if a user can zoom into the photo without having to open the product page.

Here, you can also publish personalized suggestions and seasonal offers. Be sure to update your feed all the time, so users always get new options. 

A transparent order

If your company charges users for delivery or packaging, make sure to display these expenses clearly. If an additional service can be refused, you need to provide a user with the possibility to refuse the expense. 

Also, users should have a possibility to add or remove an item anytime during the order. Use cookies to make sure that all progress is saved correctly. The order shouldn’t take more than one or two interactions. 

Real-time order tracking is a major competitive advantage. You can integrate GPS tracking and allow customers to see where their order is right now. It will increase trust in your service and make the wait time less annoying. You can use IoT sensors on the package, or communicate with a vehicle via GPS to get real-time updates on locations — and the data will be streamed directly to the client’s side of the app. 

Versatile payment options

A good way to simplify order finalization is to offer multiple possibilities — a credit card, popular systems, and digital wallets. You will save your end-user a lot of hassle by enabling payments via phone. 

For card payments, you can integrate an official API of the most popular banks, allowing users to connect directly to their bank’s server. All transactions should be finalized with the invoice and the customer will have access to full payment history. 

Additional features

We covered the core functionality of an online delivery app, but these features alone can’t make you a leader of the market. Let’s review some simple add-ons that add a premium touch to the user experience.

  • Progress display. Both registration and order should be accompanied by a visual progress bar. To motivate users, show how many steps are left, and how close they are to the end.

  • Add lists. Shopping lists, wish lists, or gift lists allow users to save the meals that they can’t order now for some reason. You can later use retargeting to remind them of these products on social media — these measures will land you a lasting customer relationship. 

  • Real-time consult. Users should be able to contact customer support without leaving an app. You can integrate call and text features into your service, or connect it to existing messengers. 

  • Monitor the number of orders. This allows you to encourage long-term customers by giving several points for each order. Customers will be able to exchange them for free meals or drinks. 

These small interactive features make the difference between a mediocre delivery app and a premium one. If you strive to become the leader of the market or expand globally, these possibilities aren’t optional anymore. 

Best Online Delivery Apps Right Now

Before starting to develop an app for food delivery, we recommend to first get a feel of existing food delivery apps. Seeing how other companies approach user experience and handle logistics can spark innovative ideas about your project. 

Seamless

This application works as an aggregator — the service partners with thousands of restaurants worldwide. Seamless connects users to restaurant menus — they can place an order, take a look at the pictures and descriptions, read clients reviews, and receive a special discount. With 20 years on the market, the application supports more than 600 US cities. 

Functionality

  • Seamless supports pre-orders and re-orders allowing users to remember their favorite meals;

  • The app uses notifications to remind customers about new offers and order progress;

  • The app supports coupons and offers diverse loyalty programs. 

Grubhub

Grubhub allows users to sort apps by national cuisines, menu items, and restaurant proximity. Similarly to Seamless, it aggregates restaurants in the area and provides custom discounts. 

Functionality

  • Grubhub doesn’t charge users for delivery, however, the restaurants can have their fee. The customer only pays for the meal, not its transportation. 

  • The app makes a profit from partnerships with restaurants, providing them advertising opportunities. 

  • The application targets both home and work delivery — users can indicate their preferences during the order. 

However, with competition from Uber and Amazon. Grubhub’s stocks have taken quite a toll, dropping almost by half. This is a valuable lesson for business owners — you have to offer a highly personalized experience to survive on the market, not simply collect offers.

UberEats

Seeing how the food delivery market was crowded with “Uber for food” apps, it’s only natural that the company joined the trend. It’s no surprise that the app quickly became a leader of the industry. 

Functionality

  • Personalized offer curation — UberEats uses machine learning to learn customer habits and suggest their favorite food. These suggestions are also relying on personal information — age, location, nationality, etc. 

  • Pre-orders in advance for days and weeks with the possibility to create long-term orders;

  • Analytical tool for restaurants-partners that measures their profits and predicts customer satisfaction. 

  • Detailed information on calories, healthy options (vegan, vegetarian, gluten free, etc). 

The app provides users with real-time analytics, customizable lists, filters, and previews. It’s a pocket food manager, not a simple delivery app. 

Our Experience

When a client comes to us with a request to build an UberEats-like app, we start our work by examining the market and analyzing our client’s business model. We work as a reliable tech partner, suggesting new perspectives and exploring target audiences. To get a deeper feel of the market, we take the best of competitor solutions and come up with a similar but affordable solution. 

After our team finished the analysis of the project, we start planning the development process. Firstly, we outline the key functionality, just as described in this guide. Then, we work on additional features and user experience. Our team pays attention to personalized functions — we want each user to get a unique feel after interacting with an app. 

At Arounda.agency, we want to create a disruptive solution that combines the best aspects of the present solutions on the market, and also offers a new technology or covers an untapped niche. We assist our clients in finding a unique market position and help bring it to life with mobile and web development services.

Final Thoughts

The food delivery market shows a lot of promise, and it can get even better since the growing audience appreciates mobility and versatility in their food delivery. However, we should acknowledge that competition on the market is fiercer than it has ever been — entrepreneurs seek ways to tap into the field before it gets too crowded. To get a successful project off the ground, business owners should pay attention to how they present themselves to the end customer.

If you want to disrupt the market with a fresh food delivery concept and a creative execution, drop us a line — we will examine your expectations and provide a professional take on the project. The food delivery market is dynamically changing, and companies have to move fast to conquer the leading positions!

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