Food delivery services arose in the second half of the 20th century – people were able to order various dishes via phone. Today, we can get our favorite food with a few touches on a smartphone screen. The on-demand food delivery platforms can be pretty different in complexity, because not only by startups invest in them, but also big and famous restaurants. Restaurants create their food delivery applications to cover a bigger audience and attract new clients. Big players can also invest in the industry by using order aggregators. On-demand food delivery platforms are still a profitable idea for the business. The popularity of food services is dramatically growing, and so is the number of startups in this area.
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Below we’ll describe common types and differences between on-demand food delivery platforms. It will help you to choose the most appropriate model for your case.
Basic types of food delivery platforms
As we’ve mentioned above, the first delivery services arose some time ago. Before smart and simple applications appeared, people needed to call the restaurant and make orders for delivery. A lot of restaurants still provide a traditional delivery model.
But modern technologies are gradually replacing making orders via calls because they provide more convenient ways. Young people prefer technological solutions and don’t like making calls. That’s why food delivery mobile apps and web-services are so popular. It’s super-convenient for people. They can order dinner on the way home or stay in traffic. They don’t even need to make calls. All they need is a smartphone with the Internet. But food delivery platforms are useful not only for clients but for eateries too. The restaurant can shorten the time of receiving orders and optimize all the processes of cooking and delivery.
Despite the fact that restaurants are still popular and have chances to increase profit by making convenient and modern delivery platforms, they have serious competitors – on-demand delivery startups. Founders of these startups take the food business on the new level. There are a lot of such young companies today and we can divide them into groups by the business models.
Type 1: aggregators (order-focused services)
The main feature of such services is that users can make orders from different restaurants at the same time and in one app. This approach saves lots of time because you don’t need to sign up a lot of apps or web-services and make a lot of small orders. You can make one order in one place in one app.
How does it work?
As you can understand, the aggregator is a middleman between eatery and user. Clients look for dishes, compare prices and quality, choose the best variants and make orders. Aggregator collects all the orders and sends it to the restaurants. Restaurants prepare orders and restaurants’ couriers deliver them.
A lot of users think they need to pay the aggregator for using the app but the orders are paid by restaurants. Usually, aggregators have fixed fees for every order.
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Big players in the order-focused model
With this model work such famous companies like GrubHub, Hero, Just Eat and FoodPanda. These are really big companies that are well-known worldwide. But there are a lot of smaller companies in almost every country. Usually, you can face 2-3 local competitors in the country.
Type 2: “new delivery” (logistic-focused services)
The first impression usually said that order-focused and logistic-focused models are similar. Both of them have an application or web-interface that allows users to find the most suitable variants, make orders and receive dishes.
The main difference is the focus on logistics. Restaurants don’t need to hire in-house couriers because the food platform already has them. Thus, if the restaurant didn’t have couriers before, it doesn’t need to hire people, teach drivers, buy cars and make routes.
The restaurant has a lot of advantages from collaboration with a logistic-focused platform. And clients also have benefits. If their favorite eatery didn’t have a delivery, “new delivery” apps help to start the delivery process very fast.
The big players using this model are Uber Eats and Postmates.
What about the profit?
Unlike the aggregators that have fees only from restaurants that decided to become partners with food delivery service, “new delivery” takes fees also from clients. Usually, clients pay very small fees, but the number of users is constantly growing, so the service’s profit is growing too. The experts in this field say that the volume of orders in this industry might get higher than $20 bln by 2025.
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Full-stack delivery services and comparison with aggregators and “new delivery”
There is also one more model called full-stack delivery. As you can understand from the name, this service provides the whole process of delivery including making orders, cooking, delivery, support, etc. At the first glance, it looks preferable than order- and logistic-focused models.
Here we have the main benefits of the full-stack model:
- Full control. In this case, you don’t depend on third-party companies and can provide smooth and seamless delivery because you know every step of the process.
- Profitability. Of course, you’ll have bigger expenses than in two other models but you also shouldn’t share your profit with other companies.
- Flexibility. This model provides a close interaction with clients. You can receive feedback at any time and satisfy user needs without external contractors.
Looks pretty good, yes? But if you want to start a food delivery business, you need to know all the sides of every model. That’s why we prepare the list of disadvantages of full-stack delivery:
- You should have large initial fundings.
- You’ll need to hire a big team (and pay them salaries).
- You should be ready to invest in equipment, software, transport and other important things.
- Before starting you’ll need to get certificates and licenses.
Thus, if you’re a newbie in this area, full-stack is not a good option to start. You might even don’t know how to realize the first benefit of our list. Because it’s very hard to control something without the necessary experience in the field. You should pay a lot of attention to the pros and cons, and especially to the operational costs before starting.
There is no perfect variant to start a food delivery business. Full-stack is profitable but pretty complicated to start. Aggregators are easy to start because you even don’t need to have your own couriers but you should pay attention to the number of competitors among the order-focused model applications. There are a lot of real giants that already have a big part of a market. The same is relevant for the logistic-focused model. But in this case, you’ll have more control because of your own couriers and transport. Despite the competition, these two variants still don’t need huge investments as the full-stack.
Wrapping up, if you want to start the on-demand food delivery business, you should estimate your opportunities, evaluate the advantages and disadvantages of every model and choose the most suitable for you.
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