Many people signed up for delivery apps for the first time during the pandemic for meals, groceries, alcohol, you name it.
Even as case numbers decline, plenty of people are still using those apps. Several companies are rising to meet that demand, not just by offering convenience items but by bundling goods — meaning that when you order sushi, you can also ask your driver to pick up a tube of toothpaste along the way.
It’s part of the strategy by apps like DoorDash and UberEats to emerge as one-stop shopping platforms. That strategy seems to be working, at least for now.
Emma Liem Beckett, senior editor for Restaurant Dive, says said one platform has been doing particularly well adapting to changing consumer demand. This is an edited transcript of our conversation.
Emma Liem Beckett: DoorDash has really been leading the charge in this space, both because of how much it’s expanded into new verticals; they’ve really been diversifying their platform beyond just restaurant delivery, also getting into grocery delivery, convenience delivery, alcohol delivery. And its competitors are catching up, but it’s really been the leader in that space.
Kimberly Adams: This expansion into other verticals obviously takes investment. How much do we know about whether these new services, and stepping into these new verticals, is actually going to pay off for DoorDash and others?
Liem Beckett: DoorDash’s 2021 revenue rose 69% over its 2020 performance. And that’s really impressive, because 2020, as we all know, was the first year of the pandemic, where so many people who had never ordered restaurant delivery before were trying it out for the first time. And the company attributes this to so many new verticals that it’s now operating in. But that’s also driven the company’s losses up, right, because they’re having to spend to enter these new verticals and make the consumer aware of it through new marketing campaigns and promotions, and things of that nature.
Adams: The relationship between some of these delivery apps and restaurants — for a time — was quite adversarial, to put it mildly. Is that relationship changing?
Liem Beckett: I definitely think it’s changing. I think that the pandemic was really a reckoning for what that relationship is, because restaurants really had to rely on those third-party platforms in the beginning whether they wanted to or not. And so a lot of restaurants kind of had to bite the bullet, so to speak, of some what can be really high commission fees. Commission fees can sometimes be up to 30% and that’s a lot. Restaurants are businesses that run on very, very thin margins and so that’s a high cost to swallow. But restaurants have kind of gotten their bearings. And they figured out how to, you know, stay profitable in this environment and as part of that process, they’re looking around, and they’re saying, “Do I still need this third-party delivery partnership?” And so while all of this pivoting is happening, DoorDash and its competitors have been changing their offerings to be more flexible for these partners. So, we’ve seen it with DoorDash — they came out with a tiered commission fee pricing model last spring. So instead of having fees that are hovering around 30% no matter what, now partners can opt in and say, I want the 15% commission model, and in exchange DoorDash will give those partners various levels of marketing, higher or lower standing on the app, things like that. And so that’s an example, I think, of how this relationship could hopefully become more symbiotic.
Adams: These apps they seem to be growing, despite restaurants reopening. What do you think that says about where we are in the pandemic, where we are in the recovery and the role of these companies in our lives moving forward?
Liem Beckett: What we’re seeing is that people are still enjoying ordering restaurant delivery, even though they now feel much more comfortable going into a restaurant dining room and sitting down and having a meal with their family. They like the option of doing both. That’s not to say that delivery is the preferred channel for diners, because in the same way that restaurants are feeling the pinch of the cost of these delivery transactions, diners are too. Diners don’t always love paying a delivery service fee when they’re wanting something fast and easy.
Related links: More insight from Kimberly Adams
Here’s the link to Emma’s story for Restaurant Dive, all about DoorDash and its earnings.
Delivery services are not just going into bundling goods, they’re also looking into even faster delivery. Grubhub announced this week it is partnering with Buyk (like bike, get it?), a smaller delivery service that promises deliveries in New York City in as little as 10 minutes. Bloomberg has an article on that partnership and its implications.
That kind of fast-paced delivery is already getting pushback. A New York City council member is set to introduce a bill banning companies from advertising those fast-paced services, arguing that they put both couriers and pedestrians at risk.
And, as Emma points out, restaurants felt forced to use third-party delivery apps during the pandemic. Some businesses are hoping consumers will soon ditch delivery altogether. A CNN Business article shows how restaurants are making other changes, like adding more drive-thru lanes, to make pick-up more convenient.
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