Foods & Culinary

5 big reasons why the delivery boom could go broke soon

Photo: Bloomberg / Bloomberg via Getty Images

When lockdown restrictions forced the shutdown of dining rooms across the country, it seemed like a gold rush for Big Delivery, the collection of p-based services like DoorDash, GrubHub, Seamless, and others that act as third parties to connect hungry users to restaurants . Restaurant owners desperate for income had no choice but to turn to them. Customers stuck at home moved from queuing to ordering online. The act even took on something of a moral imperative when customers were told that delivery was possible “to save” the industry. In reality, what looked like a delivery boom now appears to be more of a delivery bust in disguise. DoorDash and GrubHub both lost $ 155.9 million and $ 145 million, respectively, over the past year, and it’s very likely that things won’t get better other than a complete takeover by the ghost kitchen. Here’s why.

The growth is likely not as big as it seems
Last year, major delivery platforms saw strong growth: UberEats reported restaurant base growth of 75 percent, while DoorDash increased sales by 241 percent in 2020 study edited by Daniel Minh McCarthy and Elliot Shin Oblander, an assistant professor of marketing at Emory and a Ph.D. As a student at Columbia Business School, most of the gains the industry has made over the past year are largely due to a “substitution away from dine-in” behavior. And contrary to what delivery company representatives have argued about user growth, most of the time they split customers up with restaurants and not, with users signing up for multiple services rather than individual customers.

According to McCarthy and Oblander, who looked at credit card, geolocation, and restaurant data from Earnest Research, YipitData, and SafeGrh, the pandemic generated estimated $ 19.3 billion in sales for delivery companies. This corresponded to around 70 percent of the growth The Wall Street Journal written down. While sales would have increased 122 percent last year, it would have been only 38 percent if the pandemic hadn’t stopped people from dining at restaurants. McCarthy and Oblander also write that last year growth was a U-turn: before the pandemic, customer acquisition declined, as did order frequency, and growth stalled.

So it stands to reason that sales on the delivery platforms can drop sharply, as guests are allowed to return to restaurants without restriction. McCarthy and Oblander believe that the growth of the platforms will not be permanent in 2020. “We’re just imagining it was what we saw last year, but the other way around,” says McCarthy.

Still, the authors make the caveat that delivery companies may benefit from some behavioral changes, including an increase in both long-term remote working and consumers who have become accustomed to ordering deliveries. “I think there is some of the people out there who have never tried to get a delivery before. So they preferred some of that demand,” says McCarthy, before warning that “a delivery is not viewed as a type becomes.” of patriotic service in the country or something, if we go back to work as usual. “

Regulators are watching the services’ most controversial tactics
For years, restaurant owners have complained about the ps listing their stores without consent, creating fake websites to be run by the companies, and other practices that critics have cited predatory. Doing something about these practices may feel like a hopeless task given that there are only four companies, Civil Eats reported control almost the entire market in the past year.

There could be some stimulus nationwide to address these practices that are in place now illegal in California as of January and may soon become illegal in Illinoiswhere State Senator Melinda Bush introduced the Fair Food Delivery Act, which would turn these practices into illegal and fine businesses, $ 1,000 per infraction per day. It would also allow restaurants to replace damage. The bill has passed the Senate pending a vote in the House while similar bills have been passed in Rhode Island and Rhode Island new York.

Listing companies without consent has been critical to the expansion of the platforms, and these practices are one way the companies can increase sales. GrubHub alone created 23,000 websites to be run by restaurant owners and listed alternate phone numbers created by GrubHub. Every time one of these numbers is called, even with just a question about dine-in service, GrubHub earns a commission.

Local governments are looking for other ways to empower delivery workers
Eliminating fake websites and P-records isn’t the only local legislation under consideration: Last week, New York City Council members Carlina Rivera, Justin Brannan and Brad Lander voted introduced four bills aimed at addressing concerns among deliverers. If required by law, the initiatives would require food delivery to allow workers to limit distances and routes, companies to supply couriers with insulated food delivery bags, and food delivery facilities to access toilets For the delivery of food, workers allow and set a minimum payment per trip.

City Councilor Carlos Menchaca told News website The City said the legislative package followed months of discussions with Los Deliveristas Unidos, a group of mostly indigenous Mexican and Central American delivery agents. During the pandemic, Los Deliveristas organized Unidos to raise awareness of their working conditions and demand better pay and treatment, including the use of bathrooms and safe waiting areas.

There could be more changes in the business. In ril, New York Councilor Mark Gjonaj floated the idea of ​​making the city’s delivery fee permanent (it’s currently to adjust (20 percent less than 30 percent), and a Chicago city council has passed a bill to extend the city’s expired delivery fee until at least the fall. DoorDash already seems to be trying to get around this and recently announced a new fee structure that offers options including a 15 percent fee. Since the cs were first launched, big delivery officials have argued that they are actually bad for restaurants. Matt Maloney, CEO of GrubHub, described them as “ineffective at best, harmful at worst,” claiming they would result in a loss of business. More recently, DoorDash CEO Tony Xu described she referred to Bloomberg TV as “bad politics”. DoorDash claims the CS cost $ 36 million in the fourth quarter alone.

Despite Big Delivery claims, restaurateurs say the cs fee was necessary and that companies like DoorDash charged exorbitant fees. Even if ps leads to more orders, it can still be a mistake for restaurateurs and their employees. “Even at 20 percent, it is still difficult for restaurants to make money. I’ve spoken to a few restaurants that are on platforms and it seems like their volume is increasing, but their profits are about the same, ”says John Nguyen, who co-owns Nhu Ton Com Tam Ninh Kieu and Bánh Vietnamese Shop House. “So your staff are kind of overworked, and the restaurant really doesn’t see a big profit margin there.”

Restaurateurs are actively looking for alternative solutions
In the past year, a number of smaller delivery companies have been founded that market themselves as socially conscious and / or better business partners for restaurateurs. Some focus on specific communities, such as B. Black and Mobile, an online delivery service special for black-owned restaurants. A restaurateur who was opening a business when the restaurant’s closure was suspended told Grub Street that he refused to use platforms like GrubHub – even though there were no outdoor or indoor dining options at the time. “They basically make it impossible for you to make any money,” she said. “It has always been like this. I do not want to be involved in this system with these services. “

In the meantime, restaurateurs who previously thought it necessary to use an established delivery platform now want to avoid getting involved at all. Nguyen says that while he and Ton were using UberEats for their first restaurant, Com Tam Ninh Kieu, they chose to forego a key delivery partner in their newer company, Bánh, instead of using the courier company Relay (which was itself) use object complaints and lawsuits from employees). The idea, explains Nguyen, is to help the restaurant establish its own identity in the minds of consumers. “It’s an online food court,” he says. “I knew it would be almost impossible for me to break away from UberEats or any of the other platforms when I started. Once people know you from UberEats and GrubHub, DoorDash, these are the only places they’ll go for your restaurant. “

Customers have proven that they want to order directly from operators
During the pandemic, a whole ecosystem of digital pop-ups – informal businesses that are mostly operated through social media platforms like Instagram – to have increased. Unemployed chefs, waiters, bakers, bartenders, and other professionals turned to the pop-ups when they were unemployed. Pop-ups allowed people to do their own thing and cook food or make drinks that they love or that they are passionate about. For a portion of the past year, I was ordering mostly from pop-ups, getting Montreal-style bagels, Vietnamese chicken rice, Korean tripe stew, and more.

As with ghost kitchens, these companies often lack physical space, but unlike ghost kitchens, they have the potential to create direct connections with the customers they are looking for. What made the Instagram popup boom over the past year exciting was how personal many of them seemed and sometimes offered food that no one else could.

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