Sunday Feb 05, 2023

How The Food Delivery Industry is Grappling With The First Slowdown It Has Encountered

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The last two years were really good for food delivery companies. The demand was high as people stayed home and revenues increased as more and more customers signed up. However, as the economy slows down and inflation soars, the best of times may be over for some delivery giants. According to market analysts, the total number of orders for food deliveries in the second quarter of this year grew by 11%, which is a big drop from 88% growth during the same time period during 2020. All the major food delivery companies are now grappling with the first slowdown in their short histories.

Food delivery companies have rolled out a host of measures this year as a result of this slowdown. Firstly, they are sweetening the deal to try convincing customers to become subscribers.  Subscribers pay a monthly fee but they enjoy discounts on food, they pay no delivery fees. Also, from the companies perspective subscribers actually spend a lot more than non- subscribers. Subscribers also tend to have higher order values.

Secondly, the food delivery companies are tweaking their apps to trigger more spending moving beyond food and giving people more options to return to the app. People can now order even groceries, flowers etc. now on the apps of Doordash and Ubereats.

Food delivery companies are negotiating deals with restaurants to keep them from increasing delivery prices. For instance, Doordash negotiated a deal with McDonald’s where they can’t increase delivery prices more than 30% from their in-store prices.

Simultaneously, they are also diversifying beyond deliveries and offering new services to restaurants. They have started offering loans to restaurants that have a history of good sales on the app. They have started to invest in store technology for restaurants. For example Doordash is selling QR code scanning technology to restaurants where customers can simply scan the QR code and order food on the app. This technology is becoming very useful for understaffed restaurants especially. The food delivery industry hasn’t seen a recession as yet, so the big question analysts are asking consumers; are food delivery apps a necessity or a luxury? This question remains to be answered.

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