The Evolution of Online Food Delivery Business

Did you know that the first pizza was delivered way back in the year 1889?

Surprising, isn’t it? But here’s how the story goes. A popular Naples pizza chef was asked to prepare three different pizzas for King Umberto 1 of Italy and his Queen Margherita of Savoy. The famed chef did not fail to impress and delivered three piping hot delicious pizzas to them. Little did he know that this would become a trend over a hundred years later and evolve into a major part of the present-day business. 

The online food delivery market is no longer the underdog but has evolved into a champion. Having a food ordering marketplace platform was considered a state-of-the-art innovation in the early 2000s but today the segment has expanded to different demographics across the globe. 

As more Millenials jump of the online ordering bandwagon, the food delivery market size continues to evolve at a steady pace. And as more players continue to proliferate this segment we are becoming a witness to some fresh online food ordering trends. 

Online orders by tweet, virtual assistants, smartwatches, cars, television screens and even through your own eyes are now a part of this eCommerce segment. But the innovations don’t stop there. That’s just how you can place your order. What about the ways these orders are delivered?

The modern-day delivery option includes good old delivery by a person or these crazy alternatives  — delivery by robots, pizza drones, and parachutes. Yes, you heard it right — a parachute!

And the new age  Multi-restaurant delivery software has not just improved the way food is delivered but it has also created a level playing field for the underdogs that operate through virtual kitchens. And with an ecosystem that brings vendors together, entrepreneurs are also doing their bit for society by introducing the likes of food waste apps.

So, how does this bizarre yet wonderful world of online food ordering function? 

The operations of a food ordering marketplace platform are divided into two basic models. First, the food ordering only model  — Aggregators — and second the food ordering and delivery management model — Delivery Providers. Let’s refresh our memory by understanding the definition of each in a few lines.

• Aggregators: They are the food ordering (only) businesses that negotiate with the vendors and display their listings on their respective platforms. They receive the orders from customers and route it to the featured restaurants. 
• Delivery Providers: These fleets of delivery teams are united by an Uber-like app to receive orders. Once an order is placed, it is forwarded to the featured restaurants and the delivery team proceeds to deliver it to the customers.  

Suggested Read: Here is a Brilliant Startup Idea of Online Office Food Ordering & Delivery Business

Aggregators

The traditional Aggregators followed a very simple approach. It was as follows:

• Visit potential participating vendors
• Present a partnership plan
• Establish an association
• Do some branding and marketing to attract customers
• Get customers to place orders
• Aggregators get commissions as per contracts

However, the traditional approach has also been disrupted over the years and the aggregator business model followers have secured millions of dollars in funding with some innovations of their own. 

Some of them include:

• Increasing brand value by addressing customers’ touch points and allowing them to create a positive association with the brand.
• Establishing a set of standards for the partners to follow in order to provide consistent quality food.
• Creating a win-win situation for themselves and partnering vendors through cooperative branding  — partners focus their attention of standardised food quality and aggregators focus on generating more leads.
• Giving comparison features in their mobile apps or websites to help the end-users make an informed decision before placing an order online. 

Apart from following the aggregator  — order only — model, these businesses are now also transitioning towards creating a order+delivery model in order to cater to their customers in a better manner. 

Fun Fact: “Currently, 26% of traditional food delivery orders are placed online, and this figure is expected to grow in the next few years.”

Delivery Providers

The delivery providers also allows the customers to compare menus, rate their favorite places and place orders online. The only difference in this model is the availability of a dedicated logistics team that manages deliveries.

Since a large number of restaurants do not have a delivery team, they collaborate with delivery providers and pay commissions to the volumes of upto 30% of order amount in exchange for their delivery services. 

Thanks to the increasing number of online users and vendors, the delivery providers have a sustainable business model. These businesses have immense opportunities to expand their services to a new geographical area and cater to new demographics.

While some outlets maintain their own fleet of riders to deliver food, outsourcing the delivery services seems to be a preferred approach by majority partners. It is more cost-efficient and has been created while taking local market dynamics into consideration.

A Life Beyond Standard Delivery Models

But the delivery scenario innovations don’t stop here. Not by a long shot. Every new entrant into the market brings something new to the table and over the past few years we have seen some notable improvements in the business model. Some of them include:

• Cuisine/restaurant-style design layouts
• Menus displayed in real-time
• Push notifications in mobile-apps 
• Option to create user profiles
• Live order tracking and hassle-free delivery

And if this doesn’t satisfy your hunger for innovation in food deliveries then don’t frown, here is another interesting update. You can also order a pizza through a pizza vending machine and get custom-made pizzas in a matter of minutes. 

Surprised? Don’t be. Pizza ATMs are a real thing and following in the footsteps are vending machines for Omelettes. So, while these machines won’t deliver the pizza or omelette to your door-step, you will be able to go out and grab those dishes without the frequent wait and at your own convenience.

Fun Fact: “It is expected that online food delivery market will reach $23.5 billion by 2025.”

The World Loves to Order Food Online 

According to a whitepaper published by Sesame token, the global food ordering and delivery sector stands at $95.64 billion and it is a mere 1% of the total food market. If that doesn’t make you want to start an online food ordering and delivery business then what else will?

Despite the fact that this segment has experienced significant growth in many countries, there are still new demographics to cater to, new niches within the niche can be created and the world is always open for some new ideas. 

Want more evidence? Well, if we talk about the overall food ordering market, about 42% of the orders are placed online. Which means you have a clear chance of capturing a good market share and leverage the advancements today to attract the remaining 58% of the users to your brand. In addition to that, the food sector collectively has an annual growth rate of about 3.7% and interestingly, the online food ordering and delivery segment is growing at an annual rate of 15-20%.

Need more information? Here are some interesting facts for you:

• The US food delivery market alone is expected to grow by 79% in the next 5 years.
• Food ordering and delivery business is expected to grow by $30 billion (from $43 billion in 2017 to $76 billion in 2022) at an annual growth rate of 12% over the next five years
• Apart from the millenials, online ordering and delivery is also becoming a favorite among the users in the age group of 35-44 
• The top five players in this sector have a combined valuation of $11.52 billion.

Phew! That’s a lot of potential and an untapped one. There is no better time than the present to get on the online food ordering and delivery bandwagon. And it’s not even that tough to get started. Why? Because you can start a website and mobile app instantly using platforms like Yo!Yumm  — an out-of-the-box solution to create food ordering marketplace platforms.

Suggested Read: Tap into Customers’ Need to Find a Solid USP for Your Online Food Ordering Startup

Here is a Hack to Ensure the Success of an Online Food Ordering Business  — Customer Retention!

That’s right. Customer retention is the most important factor in keeping any business afloat and resonates with profitability. Just try to count how many times you have been to your favorite restaurant or how many times you asked a friend to come along or recommended them the place. 

Tough to recognize, right? Believe it or not, you are a repeat customer here and you have contributed immensely in your favorite restaurant’s growth via word-of-mouth marketing. 

Maybe it’s time you got a paycheck from them for your unwavering support or maybe a couple of free meals should be a good compensation.  

Anyways, jokes apart. Online food ordering and delivery business is no different. If you start your own marketplace then you won’t be able to go far without a loyal and happy customer base. So, why is investing time and effort in customer retention important? Let’s find out.

• More repeat sales: A joint study by BIA & Kelsey states that retained customers spend 67% more on your platform as compared to new customers.
• Higher revenues and profits: According to a research conducted at Harvard Business School, a mere 5% increase in customer retention can help you raise profits upto 95%. How? They use your platform to order regularly and this helps in increasing revenues significantly. 
• Word of mouth marketing: According to a strategy research report by Accenture, 55% of the loyal customers are likely to recommend your brand to their friends and family. So, from a loyal customer you have at least 10 more potential customers. This is the true power of word of mouth marketing. 

How to improve customer retention? Here is a hack to execute customer retention effectively. When starting your online food ordering and delivery business, make sure it is available on mobile platforms.

Whether you go for  native apps or hybrid apps or PWAs, having a mobile presence is a must. We cannot deny the fact that the majority of users access the web from their smartphones. And sparing them the trouble of getting up, switching on a computer and logging in to place an order adds to their convenience. 

Pro Tip: Convenience and usability are the most important differentiating factors for your business website or mobile app.

To Wrap Up

With all the extensive information about aggregators, delivery providers and the perfect hack for an online food ordering business you should be able to create a plan for your own venture. 

You can start building your business website and app with the help of an in-house team or you can play smart and opt for ready-made and customizable food ordering marketplace platform like Yo!Yumm to have your website and mobile app up and running in no time. 

Leverage the huge potential that the online food ordering and delivery business has to offer and take the right steps to become the next market leader. We wish you success with your new entrepreneurial journey. 

Did we miss something? Let us know your thoughts in the comment section below.