Food & Dining

Restaurants, Marketplaces and the Amazon Effect

As third-party delivery channels continue to evolve in this socially distant, contactless era, traditional restaurants need to aggressively scale all methods to ensure they stay connected to their customers.

Many restaurants have realized COVID-19 has presented an opportunity to experiment and learn more about what customers really want.

Restaurants’ potential trajectory has parallels to challenges that retail and consumer packaged goods (CPG) industries have faced with Amazon and other grocery-delivery platforms. The collection and use of data and enhanced delivery options will go a long way to shaping the future of the industry.

Delivery players like DoorDash, which has more than 340,000 restaurants on its platform, have sought to deepen their relationship with restaurants and capture valuable first-party customer data. DoorDash has 45 percent market share in the United States, the largest of any U.S.-based third-party delivery platform, and it recently launched its Storefront tool that lets restaurants create their own websites to accept delivery and pickup orders and gain access to customer data.

Although third parties have charged restaurants heavy fees for delivery, the restaurant data analytics landscape is already competitive.

Instacart is setting a precedent with some retailers where they share data, and this should be the model for third-party delivery platforms and restaurants, said Kristen Groh, group vice president, consumer goods, North America.

“Delivery platforms can likely charge more for their platform if the value back to the restaurant is more than just revenue and access to customers,” said Groh. “That first-party consumer data is very valuable and should be considered as part of the overall business model and relationship with restaurants and retailers.”

What data does for restaurants

COVID-19 has renewed the pressure on restaurants to invest in new data-led initiatives as customers seek contactless ordering solutions that span multiple channels, which often make capturing and aggregating data complicated.

Data analytics help reveal how restaurants could better serve customers and the services and products they could add to their offering

Restaurants should think of analytics’ benefits using these four frameworks that:

• Connect available data with actions a company takes to drive customer experiences and optimize operation
• Organize customers into value-based segments and advise on incentives one customer at a time, with confidence in driving to the desired outcome
• Set automation of fast pace experimentation, focused on successive risk-free incentives and experience transformation
• Provide a main justification for continuous investments in a comprehensive data platform, like customer data platforms

Expanding food delivery’s influence

Fresh off raising $400 million in June that puts its valuation at nearly $16 billion, DoorDash’s ambitions to become an all-in-one solution for customers has become more apparent. The company’s DoorDash Essentials service aims to deliver more than 2,000 convenience store items in less than 30 minutes. Uber also announced in July that it’s buying Postmates, taking a similar route as DoorDash.

Large chains can learn from DoorDash and Amazon in becoming a brand that provides services for a variety of customer needs like grocery or prescriptions delivery.

“There isn’t an Amazon in dining right now, and any delivery player that wants to win in this space needs to become like Amazon with that kind of scale, and it looks like DoorDash is going down this path,” said Dan Lubetsky, senior director, customer experience and innovation.

From a CPG perspective, DoorDash Essentials sounds like just another retail channel. But if it’s done right, DoorDash could set up a relationship with CPG companies that enables DoorDash to use dark stores that serve as warehouses and last-mile delivery as a means to go direct-to-consumer selling through their brand website.

“Third parties like DoorDash could also bring together brands in similar need spaces, such as all vegan food, or specifically sustainable products, on a marketplace platform where consumers could purchase the product that is ultimately fulfilled by DoorDash dark stores and drivers,” said Groh. “It really opens the door for them to become a true platform business model.”

Direct-to-consumer trends and competition

Along with CPG, retail and grocery also offer delivery lessons, and Amazon isn’t the only online retailer with a sophisticated delivery ecosystem. Digital-first retailers likely have strong offerings to succeed during and after the crisis as they drive awareness, customer engagement and revenue through digital channels, such as web, mobile, and social. Consumer product brands have successfully moved to direct-to-consumer offerings and grocers  have expand their online presence to capture digital revenue streams.

So what’s next? The opportunities are abundant.

Key delivery considerations

1. More QSRs will own delivery: Many restaurants will re-focus on owned and operated delivery services to drive higher profitability rather than rely on third parties. It is important, however, to consider that restaurants shouldn’t have a one size fits all approach for all geographies as third-party services are popular in some areas and less so in others. Some markets are also more sensitive to third party fees and prefer to order directly from restaurants, according to one UK study.
2. Don’t forget third-party delivery differentiators: Delivery partner consolidation will heat up and new offerings will emerge, such as personalized menus and offers, suggested meals, multi-restaurant options and event services. This will be key for individual restaurants or smaller, regional chains.
3. Mobile will continue to be the off-premise channel of choice: Ordering delivery on a mobile device also has to be easy, and ease in transparency will lead to more customers adopting a QSR’s platform. Integrating loyalty offers with delivery is key for QSRs to drive longer term value.

Driving delivery forward

Some QSRs are still in the early stages of an owned delivery program and remain reliant on partners. But third-party services are here to stay, and the way that QSRs fully adopt and evolve their offerings will greatly impact their future growth. QSRs need to embrace delivery as another option to engage with customers, consider unique experiences and determine how to run their own program directly to drive the greatest return.

Those QSR brands that have reached critical mass must continue to innovate, assess current and future competitors and strive for a balance of owned and third-party solutions. The QSR that can deliver the best service themselves, with the strongest customer experience, can increase customer engagement, customer satisfaction and profitability.