Food-delivery startups still looking for stable business
Food-delivery startups still looking for stable business models amid heavy competition
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The food-delivery market in the US continues to heat up with multiple startups looking to gain market share.
As a result, many of these startups are looking to change their business model in order to gain more customers and grow sales. For example, numerous food-delivery companies have begun adopting subscription models, reports Bloomberg.
The following food-delivery companies offer both one-off orders and subscription plans:
- Munchery introduced its subscription dining plan yesterday in the US. Diners can now pay $8.95 per month or $85 per year in exchange for a 15-20% discount on entrees.
- Postmates rolled out its subscription plan last month, charging customers $10 per month in order to bypass delivery fees on orders of $30 or more from partnered restaurants.
- Sprig also adopted a subscription model for $10 per month to bypass delivery fees.
The subscription model is likely a way to help drive customer loyalty. By locking diners into a monthly fee, it will encourage them to use the platform more often instead of turning to competitors.
In addition to subscriptions, Uber continues to play around with its food-delivery division UberEATS. Until recently, UberEATS only used pre-selected meals from partnered restaurants so that it could promise delivery in as little as 10 minutes. However, the company recently announced that it was shutting down this service in its New York City market, reports Quartz. While the service is still available in all other UberEATS markets, it is apparent that the company is trying to focus on a wider selection of menu items to reach more customers.
As these startups all try to find their footing in the crowded market, we expect to see more adjustments to business models marketwide. Additionally, after they find the best way to grow market share, we expect that new cities will continually be added at a rapid pace to reach more consumers across the US.
Quick-service restaurants (QSRs) — also known as fast-casual restaurants — such as Starbucks have been turning to mobile order-ahead apps to extract higher sales, intensify customer loyalty, and heighten foot traffic.
Mobile order-ahead refers to a consumer-facing mobile payment platform that allows customers to order food remotely, pay for the items on their phone, and pick up their order at a specific restaurant location.
Leading QSRs in the U.S. are beginning to adopt these platforms at an accelerated pace and are benefiting from them. Taco Bell sees 30% higher average order values on mobile compared to in-store, and Starbucks' Mobile Order & Pay already represents 10% of total transactions at high-volume stores, directly contributing to increased company sales.
Mobile order-ahead is still in its early days, but will be a $38 billion industry by 2020, accounting for 10.7% of total QSR industry sales. This will be driven by full adoption among the top QSRs in the US, the growth of mobile commerce, QSR adoption through aggregators like Grubhub, loyalty programs, higher average order values, and new buy buttons.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed Mobile Order-Ahead Report that profiles the companies that have proved the mobile order-ahead concept and analyzes the trends contributing to this new industry's growth.
Food-delivery startups still looking for stable business models amid heavy competition
Here are some key takeaways from the report:
- Mobile order-ahead apps — platforms that enable consumers to remotely purchase menu items for in-store restaurant pickup — are on the rise among quick-service restaurants (QSRs). We expect sales on these platforms to reach $38 billion by 2020, representing a five-year compound annual growth rate (CAGR) of 57%.
- Mobile order-ahead will ultimately have an additive effect on the QSR industry. Mobile ordering platforms have been proven to intensify customer loyalty, increase purchase frequency, and lift average ticket sizes through order customization and easier checkout options. This means that mobile ordering is not a simple substitution for in-store purchasing, but a channel that can enhance the lifetime value of QSR customers. This makes mobile order-ahead a critical channel contributing to the growth of the QSR industry.
- Alternative commerce solutions will help propel mobile ordering. Aggregators like Grubhub will onboard smaller fast-casual restaurants into the mobile ecosystem by offering them an existing app to integrate into, lowering the upfront costs of creating a mobile channel of their own. And in-store self-service kiosks will help popularize remote ordering and accustom users to less traditional forms of payment that don't require a cash register.
In full, the report:
- Forecasts the growth of the mobile order-ahead industry in the US from 2015 to 2020, including its share of total QSR sales.
- Profiles brands that are leading the migration to mobile ordering.
- Examines the alternative commerce solutions that could help popularize mobile order-ahead.
- Explains the risks and drawbacks to launching a mobile commerce platform.
- Assesses the ways both large and small brands can create a mobile order-ahead platform.
- Determines which types of fast-casual chains are in the best position to benefit from mobile order-ahead.
To get your copy of this invaluable guide, choose one of these options:
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of mobile order-ahead.