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The rapid growth of online food delivery services has disrupted the traditionally offline restaurant industry and this growth has come about due to e-commerce. Delivery transactions made up six percent of total US restaurant sales in 2017 and are estimated to reach 40 percent of all restaurant sales by end of 2020, even more so with the onslaught of the pandemic.
It shows that convenience is an important factor in drawing potential customers to online food delivery and time restraints plus a busy schedule sometimes paves way for online food delivery instead of visits to the restaurant in person. Restaurant revenues are increasing but at times their profitability does get affected. By 2018, the online food delivery industry had an estimated $82 billion in gross revenue and accounted for 6 percent of the restaurant market in 2020. Some restaurants have resorted to “delivery only” model.
Sales have increased for restaurants offering online delivery even though restaurants have to pay a fee to online delivery companies like Grubhub, Doordash or Ubereats. The customer also bears some cost but the convenience of having food and convenience store goods delivered to their doorstep is important for some customers like the elderly.
As COVID-19 continues to affect people’s lives, the demand for contactless delivery will likely expand as restaurants remain closed and dine in facilities restricted. There has also been a rise of new delivery entrepreneurs in the market who are expanding the overall market. Instead of competing with the big aggregators or delivery companies – they are extending food delivery to a group of restaurants and customers.
Some key factors for the adoption of online food delivery are the overall level of funding and budgets for marketing. Indeed, technology plays a significant part as well as smartphone penetration so more users are able to place orders on their tablets or smartphones using the apps.