How Can Food Delivery Services Improve Profitability And CX?
Deliveroo, Just Eat, Uber Eats, Glovo, and Delivery Club are the top five online food delivery services in Europe. All these services have become a normalised part of daily life for most people during the pandemic. However, even without the pandemic effect, all these companies have seen strong growth in the past five years.
The overall Online Food Delivery Market in Europe is predicted to be valued at US$ 20.27 billion by 2026, growing with a 5.83% CAGR from 2020 to 2026. Online food delivery has been growing so fast in the past few years because smartphone penetration has finally reached the point where most Europeans that want to use a smartphone now have one.
But the market is challenging. With so many options available, none of the brands have dominated the market and turned revenue into profit. Some analysts believe that profitability is impossible given the way that the market is now structured.
Analysis of the US market shows a similar picture. The most prominent players there are DoorDash and Uber Eats. However, Uber Eats has never made a profit, and DoorDash only made a profit during one quarter in the middle of the pandemic – when in-person dining was impossible.
The biggest problem for all of these companies is the cost of customer acquisition because most customers do not differentiate between the different services – they are generally seen as all just the same.
So what can these companies do if most customers perceive that there is no difference between them? I believe there are a few key actions they can undertake, including:
- Get better offers from the restaurants: if customers actually do compare prices, they will see that restaurants are charging different rates on different platforms. If platforms talk more often to restaurants and arrange deals – and then inform customers about the offers – this can create a switching effect.
- Get a better range of options: constantly engage in a sales process to encourage new restaurants to sign up, so the delivery options are more comprehensive than rival platforms.
- Improve CX: how do customers feel about your app? Is it helpful and informative? Is the process of getting help simple? Think about how to react when a customer asks a question.
- Personalise more: you have data on when restaurants are busy and quiet as well as what customers are ordering and exactly when they order. Can you create special offers to encourage more business for restaurants on their quiet days or to encourage a customer to make a repeat order? Think carefully about the data you have and how it could be analysed to create nudges.
- Change model: Gorillas was only founded last year, but it is already attracting serious funding from investors. Gorillas pay riders a salary – they are not gig workers. It charges flat delivery fees to customers. Restaurants and stores deliver food to distribution centres, so riders are not collecting directly from restaurants. It’s a quite different model. Will it work? It’s too early to tell, but this is a fast-growing market, so experimentation is welcome.
Managing the interaction between the delivery platform and the restaurants and customers is the key, and that requires a focus on account management processes. How can you continuously build on your relationship and offer new ideas and services to these customers?
Please get in touch with me directly on LinkedIn here if you want to discuss these ideas further. I believe the opportunities are out there for food delivery services, but they cannot just expect customers to keep returning to their service when most customers think they are all the same.