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Food Delivery is Broken, But Now is Not the Right Time to Fix It

Brands are working to lessen the burden of delivery on their operations, but the capabilities required to grow delivery as a sustainable service model are still too far afield to make immediate impact.
12/9/2021
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In response to pandemic restrictions and a surge in demand for at-home dining, brands were forced to rapidly expand delivery services by partnering with multiple delivery service providers (DSPs), working expediently to integrate their owned digital ordering platforms and restaurant systems with mixed results. Now, even as restrictions have eased, delivery orders as a percentage of sales have persisted, with customers accepting an additional expense in exchange for convenience. There is no indication that customer demand for delivery will cease, and despite low margins, brands have welcomed incremental sales from DSPs. None of the major brands have opted out, effectively establishing delivery service as status quo.

However, as with anything built too hastily, food delivery is not up to par; it’s not working well for customers or the restaurant brands that are offering the service. In a Datassential survey, customers indicated dine-in was superior to delivery by nearly a 4 to 1 margin in all categories surveyed, from food quality to order accuracy to overall experience. This shows that customers know that when they choose delivery, they are paying more for a worse experience. For brands, delivery is incredibly margin erosive, they are disintermediated from their customers by DSPs, and even when customers opt to order via a brand’s white labeled delivery service there is no control over the end-to-end customer experience. Not to mention, complexity in the kitchen is at an all time high.

 

[75% of consumers prefer to order delivery direct from the restaurant, according to HT's 2021 Customer Engagement Technology Study.]

Brands are working to lessen the burden of delivery on their operations, but the capabilities required to grow delivery as a sustainable service model are still too far afield to make immediate impact. Here are three reasons why truly “fixing” delivery right now is both impractical and improbable.

Driving Digital Adoption Takes Priority
From a prioritization standpoint, a focus on driving digital adoption is taking center stage as brands fight to increase digital sales, driving both guest count and bag size. Investments from both a capital and people perspective are consumed by building out customer relationship management (CRM) programs, developing and deploying loyalty programs which provide the backbone to the digital customer value exchange, and building capabilities to leverage first-party customer data more effectively, working toward personalization. Non-delivery digital orders have a lower cost to serve than delivery, but typically have bigger bag size than non-digital orders. As a result, efforts to scale digital are simply a higher priority than delivery when it comes to growing the business and improving operating costs.

Operational Complexity Has Reached a Tipping Point
In the face of major staffing shortages, operational complexity is reaching a breaking point. Brands are taking steps to address the complexities introduced by a higher percentage of guests ordering digitally. Pushing harder on delivery has significant operational downside, potentially putting brands at risk if demand for delivery surges as failing to provide a good experience – did you forget the sauce again? – jeopardizes long-term customer relationships.

There Are High Barriers to Cost Efficient Delivery
The economics of delivery remain questionable; there is a reason that DSPs have been, until very recently, operating at a loss. First-party delivery is not viable for most brands given labor availability limitations and the operational complexity of introducing a new suite of capabilities that weren’t previously required. Despite excitement and investment, autonomous vehicles are still too nascent for deployment at scale. The best brands can do to mitigate cost to serve is to shift their real estate footprint and staffing models, conducting store portfolio evaluations, and increasing adoption of ghost kitchens. Cost reduction must be dramatic and will take time.

Brands should continue to invest in incremental improvements to delivery, but the most effective of these will improve all service models. Improvements to order accuracy, culinary innovation which extends shelf life of prepared food, and streamlining kitchen operations to better fulfill digital orders will increase customer satisfaction while lowering costs. Brands must not focus on just delivery but widen the aperture to address operations head on in order to pave the road to sustainable growth of the service.


About the Author

Jackie Walker leads strategy for Publicis Sapient's Dining & Delivery practice, bringing specific expertise on digital signage and related in-venue technology. In her more than 11 years with Publicis Sapient, she’s helped clients across industries bring enterprise thinking to their digital solutions for physical spaces, focusing on Digital Menu Boards for the last 3 years. Jackie has published thought leadership including podcasts and webinars on the future of digital menu boards and QSRs for QSR Magazine, Modern Restaurant Management, Digital Signage Today, and 16:9. She has led digital menu board strategy and technology programs for leading category brands and is the Product Owner of Publicis Sapient’s Premise solution.

 

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