Delivery drivers are everywhere it seems.
For a driver or cyclist living in the city, it’s hard not to notice the number of extra bikes or mopeds on the streets.
Walk down your local high street, and you’ll see gangs of Deliveroo drivers congregating outside fast food restaurants.
Undoubtedly, the COVID-19 pandemic helped the food delivery industry tremendously. With everyone stuck at home, with little to do, a takeaway or food delivery quickly became the highlight of many people’s day or week.
I know it was certainly mine.
Many mornings and afternoons were spent browsing Deliveroo or Uber Eats deciding what I’d get that night or at the weekend.
It was something to look forward to. A little treat at a time of isolation.
It’s perhaps no surprise then that, according to Business Wire, The Europe Online Food Delivery Market is projected to reach US$ 66.2 Billion by 2027.
IBIS World also reports that In the UK, the market size of the online food ordering & delivery platforms industry has grown 35% per year, on average, between 2017 and 2022.
But now that the pandemic has eased and life has started to go back to normal for most, what does the future hold for the food delivery industry?
Are we going to see continued growth? Or will we see things slow down?
In this post, we’ll be deep diving into the top challenges facing the food delivery industry, and we’ll also look at some of the ways that they can overcome them.
So, what are the top challenges facing the food delivery industry?
We think that they are:
- Cost of living
- Increasing Competition
- Customer Service
So let’s look into it further!
Cost of Living
The cost of living is becoming increasingly difficult for many people in the UK with prices continuing to rise at the fastest rate for 40 years with food costs alongside fuel and energy hitting the public hard.
In fact, UK inflation, the rate at which prices rise, edged up to 9.1% in the 12 months to May, from 9% in April, the Office for National Statistics (ONS) said.
For many, this means cutting back on non-essential or luxury items.
Unfortunately for food delivery services, this will probably mean that people will be cutting back on the number of takeaways and groceries that they get delivered.
In fact, according to Big Hospitality, a third of people in the UK have already started cutting back on eating out or getting takeaways.
Apps like Uber Eats, Deliveroo and Just Eat had made it so easy for people to get takeaways, but a rethink might be needed for those who used them regularly.
It’s likely that even when people do choose to get a takeaway, more people might make the effort to walk to their local restaurant to collect their order to avoid the delivery and order charges through the apps.
The same goes for grocery deliveries. With the cost of living causing many people to struggle financially, more and more people are likely to make the effort to return to the supermarkets again and avoid the excess fees that delivery services bring and find cheaper alternatives when it comes to the food they’re eating.
It’s not just consumers that will be impacted by the cost of living crisis in the UK however.
According to Ismail Kuden, Co-Founder of Kuden Rugs, the price of labour will also influence the food delivery industry.
“The food delivery industry is facing a number of challenges that threaten its future growth. One of the most significant challenges is the rising cost of labour.
With the minimum wage increasing, and the cost of living continuing to rise, food delivery companies are struggling to keep up.”
The cost of living is clearly having a huge impact all round.
So what can food delivery companies do about it? How can they retain their customers?
Well, one thing they can do is try to help consumers with discounts or offers.
For example, to help with the cost of living crisis, companies like Iceland have started to offer free grocery deliveries for those on tight budgets by reducing the thresholds of its free delivery service from £40 to £35 for online and from £25 to £20 for in-store.
This may not seem like a huge amount, but in the words of Tesco, “every little helps”.
Takeaway services may also have to consider special offers or discounts for their customers to get them to use the apps again.
This ties in with the next challenge below (competition), but another way in which food delivery services could increase customer retention during the cost of living crisis is by offering rewards or loyalty schemes.
Many delivery platforms have begun offering monthly subscription services, following similar models such as Amazon Prime.
Deliveroo, DoorDash, Uber Eats’ and Just-Eat have all introduced schemes with offers that reduce delivery costs and provide special offers/rewards for customers who order frequently.
If other food delivery services want to compete, this is something that they may want to replicate.
For example, Just Eat’s stamp cards allow you to get a stamp every time you order from a participating restaurant. Once you have 5 stamps from the same restaurant, you’ll get an exclusive discount to use on your next order.
This works well for both Just Eat and the participating restaurant as it encourages the user to keep using the Just Eat app and to keep ordering from the same restaurant.
Win-win.
Competition: Huge amounts of competition with beginners offers
Deliveroo, Just Eat, Uber Eats, Getir, Gorillaz, Foodhub…the amount of food delivery services available is huge, and it doesn’t seem to be slowing down.
Whilst this is great for consumers as it allows a wealth of choice, it also provides a great challenge for these businesses.
Often, when a new food delivery business comes on the market, they have an abundance of beginner offers and referral fees etc. to entice people to use the app or service.
Whilst this may be a good way to reel customers in, it doesn’t necessarily mean that they’ll remain loyal.
We spoke to Vicky Cano, Chef and recipe blogger (https://mealfan.com/) who said that the issue with so much competition is that:
“Consumers can easily switch from one delivery service to the next if they feel like their needs aren’t being met”.
Similarly, we spoke to Dmitriy Bobriakov, Marketing Manager at Virto Commerce who said: “Another challenge facing the food delivery industry is customer retention and loyalty. Customers want free shipping and discounts, so companies need to find ways to entice them into staying loyal without losing money on shipping costs or discounts for customers who don’t need them!”
I, for one, have been guilty of taking advantage of free £10 gift vouchers for the first use of a food or grocery delivery app and continuing to get money off by referring friends.
Once the offers end, my use of the app typically does as well.
Not ideal for these new businesses who’d hoped to keep these new customers loyal.
Essentially, the objective for each new food delivery company has been to kill off all the competition, just like Amazon and these offers often help to do that for a short while.
In the long term however, this has led to enormous losses for a lot of food delivery services and those within the gig industry.
We spoke to Zephyr Chan, a growth marketer for direct-to-consumer brands and the founder of Better Tools who said:
“One marketing challenge that the food delivery industry is also facing is online saturation. Many food delivery startups have recently popped up, and chain restaurants are offering their own personalised delivery services. All of these have flooded the internet and social media with targeted paid ads and aggressive posting.This saturation leads to the rest of the businesses suffering as well.”
When it comes to food delivery, competition is fierce. As such, to succeed, you need to be doing something different from your competitors.
If you’re already in business, here are some other ways in which you can try to stay ahead of your competitors:
Gamification
What if you could gamify your app so that restaurants could be grouped in different ways and then rewards were given for getting takeaways from that group of restaurants? For example, could you recreate something like the Curry Mile in Manchester and offer a free meal or 50% off your next order, once you’ve “completed” and ordered from each restaurant on the route? Or what about McDonald’s Monopoly? Could you use gamification in a similar way, offering users scratch cards for free items from restaurants or the chance to win money off?
Happy Hours
Who doesn’t love a happy hour!? Could you partner with restaurants during their quietest hours and focus on selling their products during that period with either special deals or discounts, or even a special “happy hour” menu for your customers? Push notifications could also help to drive more sales during these times.
Lunchtime deals for businesses or colleagues
Could you offer special discounts or offers for people buying in bulk? Say you’re a business and you’re treating your staff to a takeaway and buying 15 pizzas, or maybe you’re trying to impress your clients during a meeting, could you offer a business lunchtime deal for those situations?
Split payments
We’ve all been there, when we’ve sat around with friends and decided to order a takeaway and someones been left with ordering, having to front the cost and then chase everyone for payment after (and there’s always one person who takes ages to pay you back…). But what if you could split payments within the app, just like you can do when ordering an Uber? Much easier!
If you’re starting a food delivery service, there are many things you’ll want to do before starting:
These include:
- Checking the number of competitors in an area already. Is the market already saturated?
- Check the demographics of the people in the area. Are they likely to be buying takeaways regularly?
- Check the number of restaurants in your desired area. Is there enough variety to keep your customers happy?
- Check if you can get the delivery staff? Are there enough drivers in your area?
Customer Service
One of the biggest challenges facing the food delivery industry is customer service and this is particularly true when it comes to fast food delivery and businesses like Deliveroo, Uber Eats and Just Eat.
Customers ordering a takeaway want their food to arrive within the time they’re given on the app and will typically want it to be fresh, still warm and not to have been thrown around in the bag it’s been delivered in.
This is a particularly difficult challenge as both the restaurant and the delivery drivers playing their part in the customer’s overall experience.
The restaurant has the responsibility to ensure that the food is cooked correctly, with the right allergies catered to, and on time, and this can be a real struggle at peak times.
The driver needs to make sure he gets to the right destination, goes the quickest route and doesn’t spill any of the food.
Put together, this can often be a disaster.
Let me tell you about an experience I had a few years ago:
I’d ordered a takeaway from Deliveroo on a lazy Sunday afternoon and the food took longer than expected. I called the restaurant to find out what was going on, and they explained that they were extremely busy, but that my order was being made.
Not ideal, but ok, the food was at least nearly ready.
After about another half an hour, I saw on the app’s tracker that the delivery driver was right near my house for a few minutes, but I still hadn’t got a notification saying he was outside.
I could see that the driver was close on the app so my curiosity (and hunger) got the better of me, so I went outside to see where he was.
To my horror, the delivery driver was around the corner from my house, with the food all over the floor. Even worse, he was picking up the food from the floor and putting it back into the boxes.
When I asked what was going on, he said he was just picking it up so that he could go and get replacement food from the restaurant. I had my doubts…
I then had to wait another hour for the food to be sent back, made again and delivered again. In this instance, most things that could possibly go wrong did.
Who could I blame? What do I say when making a customer complaint!?
An extreme example perhaps, but the whole experience put me off ordering from them again and since then, I’ve used alternative services.
Unfortunately, complaints are commonplace when it comes to food delivery services and this puts restaurants and drivers in an awkward position.
For restaurants, they don’t want their reputations damaged, customers leaving bad reviews and to lose out on repeat business, because of issues with the delivery driver.
At the same time, delivery drivers don’t want to get bad ratings because of issues with the restaurant or the food itself.
So what can food delivery services do to tackle issues with customer service? Here are some of our tips:
- Ensure that deliveries are completed within an acceptable amount of time by adopting route optimisation software for drivers to ensure that they take the fastest route. Often drivers will rely on free apps or the functionality within the delivery app itself to get themselves to the right place, on time, but they often fail. I’ve seen some drivers take the wildest routes to my house, with the food ending up being late! Route optimisation software can help to stop this happening.
- Pay special attention to food packaging. When it comes to food deliveries, you want your food to be edible when it arrives! I love KFC, but have you ever had it delivered? That once delicious, crispy skin often turns up soggy and falling apart after being thrown around in the bag/box that it arrives in. An absolute disaster! Ensure that the food being delivered is of good quality and kept secure with the best possible packaging. Add safety seal stickers to keep food fresh and compact or use insulated bags to keep food warm.
- Respond to negative reviews/feedback. Listen to customers, explain the situations that have happened and then, if necessary, offer discounts/refunds etc.
So there you have it, our top challenges facing the food delivery industry. To recap, they were:
- The Cost of Living
- Competition
- Customer Service
What do you think? Are there any other challenges that food delivery businesses are facing? If so, we’d love to hear from you in the comments below.
Contact Us
If you’re working for a food delivery service and you’d like support with your digital marketing efforts, please don’t hesitate to get in touch. Give us a call on 01273 733433 or leave us a message via the form below: