Industry Report: Food Delivery Trends
The food delivery market saw an incredible surge in growth during the COVID-19 pandemic. While the world settles back into regular routines, many restaurants, grocery stores, and merchants are interested to see where the market heads next.
The industry trends going forward will play a big role in prioritizing business goals for merchants operating within this sector. To prepare for tomorrow, savvy brands should keep their finger on the pulse of food delivery and pay attention to the following key trends.
#1: The Market Will Continue To Grow
Today, the food delivery market is worth more than $150 billion globally. This market segment has more than tripled in value since 2017, largely due to COVID-19. In the United States alone, the food delivery market more than doubled in value during the pandemic.
While COVID-19 undoubtedly pushed the food delivery market to new heights, the market was already growing at a steady rate of 8%.
Much of this growth is taking place in the restaurant segment of the food delivery market. Looking toward the future, Morgan Stanley predicts that roughly 40% of total restaurant sales will transfer to online delivery by 2020, the equivalent of $220 billion in restaurant revenue.
Interestingly, digging further into the data, 43% of consumers who opted for food delivery cited it as a replacement for a meal at a restaurant, which is up from 38% in 2016. This paints a picture in which delivery orders are actually taking the place of what would have previously been a dine-in meal.
As consumer demand for food delivery options continues to grow, merchants will need to ensure that they have a reliable system in place to fulfill these requests. Additionally, restaurants must think strategically about how they will keep up with the demand for delivery orders.
For further reading, check out our Tips for Creating a Streamlined Food Delivery Process.
#2: Businesses Are Pushing Back Against Delivery Fees
As the demand for food delivery has increased, many restaurants turned to third-party delivery apps to meet their immediate need. However, in a recent report by Restaurant Dive, third-party delivery fees were cited as a major concern for restaurants.
McKinsey & Company reflected this issue in its recent report on the evolution of ordering in, as well. According to this report, third-party delivery platforms have been making money through five revenue streams:
- Restaurant commission fees — generally the equivalent of around 15 to 30% of a meal price
- Customer delivery fees — approximately $2–5 per order
- Customer service fees — an additional 15% fee tacked onto the price of an order
- In-app advertising — ongoing costs passed on to restaurants in order to remain visible on the third-party platform
- Tips — some of which go directly to drivers but all of which help subside the costs of delivery for the third-party platform
It is easy to see how these fees and high costs can eat away at a restaurant’s profits. Looking forward, many restaurants are interested in developing their own delivery programs or tapping into up-and-coming networks that do away with commissions and fees.
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