Restaurants: Ditch Third-Party Marketplaces for Direct-to-Consumer Solutions
As the COVID-19 pandemic tested the resilience of the restaurant industry worldwide, restaurant operators adopted third-party delivery marketplaces to accelerate a necessary technological shift in business practices. With dining rooms closed, these platforms provided a lifeline to businesses seeking to meet their ‘hungry customers’ in their homes. And they became the cost of doing business, with 84% of consumers stating that they currently order delivery or takeout at least once a week.
Consumers and restaurant operators have relied on third-party delivery marketplaces since the onset of the pandemic. However, as we head deeper into 2021, the true effects of these marketplaces are coming to light, including the thousands of dollars in lost revenue and missed opportunities to connect and build relationships with diners. Moving forward, restaurant operators need to integrate technology into their businesses that enables a direct approach to a complete guest experience, and keeps diners coming back over and over again. They must be careful not to unknowingly cede ownership of their customer relationships to third-parties.
The Real Impact of Third-Party Delivery Marketplaces
The adoption of a wide array of technology solutions – including contactless ordering and payments, virtual waitlists and direct online ordering – helped restaurant operators continue to run their businesses throughout the pandemic. However, a reliance on third-party delivery marketplaces has caused friction, the growing impact of which is only starting to be recognized now.
These marketplaces, oftentimes under the guise of having the operators’ best interests at heart, come at a hefty financial and operational cost. On average, third-party delivery marketplaces take a 30% commission of each order, costing operators thousands of dollars each month. Even with cities across the country placing caps on these delivery marketplaces to protect operators – it’s not enough for many to stay profitable.
The more costly impact, however, lies with data and the subsequent ownership of guest relationships as a result. Third-party platforms hold and gate-keep valuable customer data from the operators that use them. The marketplaces use this data to remarket their platform – not the individual restaurant, but often competitors – to customers. This strategy overlooks the operator and their opportunity for repeat orders and return visits. So, while it may seem that these marketplaces are quick fix in the short term to stay afloat, operators are realizing that paying with customer data is ultimately more costly than the cash cost in the short term.
For operators, the solution is direct online ordering and delivery that provides both the financial relief they need, along with full access to their own customers’ data and customer relationships.
The Immediate Benefits of Going Direct: Dollars
The financial benefit of going to direct is astonishing. Take a high-end Italian restaurant in New York, for example, that fulfills an estimated 1,500 combined delivery and take-out orders at an average cost of $144 per order over a six-month period. With 75% of their business as delivery (at 30% commission) and 25% of their business as pickup (at 10% commission), a direct ordering solution could save the restaurant approximately $54,000 over that six-month period – $9,000 a month.
That $9,000 could be used for more worthwhile causes and tools to keep operators’ doors open, including nearly a month of rent (NYC rent averages between $10,000 - $30,000 a month), 904 hours of pay for waiters or 300 boxes of masks to keep employees safe at work.
The Lasting Benefits of Going Direct: Data & Loyalty
Short term financial benefits aside, the greater, lasting benefit of going direct lies in the knowledge and opportunities operators gain from the customer data they amass.
By implementing data-driven solutions, operators can use guest data to create personalized, tailored experiences that are as impactful off-premise as those created in a dining room. In turn, these tailored experiences help build and maintain strong, direct relationships with guests, driving repeat visits and recurring revenue.
Consider a Los Angeles resident who has become a regular delivery patron of one of their favorite neighborhood spots over the past few months. By using the data collected, the operator can collect details on this guest’s favorite items and create a personalized offer or discount for them to take advantage of on their next visit – whether in-person or for another delivery. Once they visit, operators can also use this data to surprise them with their favorite dessert, or a complimentary cocktail – giving them a “surprise and delight” factor that will create further guest loyalty.
Looking forward, operators must take a hard look at how dependent they have become on third-party delivery marketplaces. They should look to implement a direct ordering solution that will not only benefit them from an immediate financial perspective, but also in the long-term through the value of the data they will collect. It’s imperative that operators make this evaluation and necessary changes to set themselves up for success as we emerge from the pandemic.
About the Author:
Joel Montaniel is the CEO & Co-Founder of SevenRooms, a fully-integrated guest experience platform for the hospitality industry. Prior to founding SevenRooms in 2011, Montaniel served as the Chief of Staff at LivePerson, leading strategic, operational and cultural initiatives. He started his career at Credit Suisse within the Real Estate, Finance & Securitization Group. He graduated with a B.A. (Hons) from Georgetown University.