The rise of smartphone digital integration is evolving and reshaping virtually every industry in the global market. Particularly, the food and dining industry has become an attractive sector for entrepreneurs as customers grow to expect more convenient, healthier, and less expensive options at the click of a button. Many smartphone users are growing more comfortable with mobile orders and digital payments, and increasing the popularity of mobile food delivery orders. With the quick tap of a button, gone are the days of calling a limited offering of local restaurants and pizza parlours. Nowadays, customers can customize their orders from a large selection of local restaurants for delivery or pick-up, at home and on-the-go.
The use of mobile ordering is estimated to compose 11 percent of all quick-service restaurant sales. These apps are reshaping how we purchase and consume food, especially amongst millennials. This is a generation that has grown up in the digital era and are influenced by social trends in food consumption. Millennials have a strong preference for prepared foods at a convenience, as they are ordering food and dining out more than any other generation. With this in mind, this generation tends to order in or dine out at least once every other week, regardless of income level. According to a Business Insider study in 2018, their purchasing power is set to surpass their parents. Globally, there are a large number of players in the food delivery market such as Just Eat, GrubHub, Deliveroo, and more. The ordering and delivery market can be categorized into three main segments:
- Traditional ordering and delivery
- New digital ordering and delivery
- Mobile pick-up
Traditional Ordering and Delivery
Traditional ordering and delivery has been a part of consumer behaviour for decades. Calling your favourite pizza place or local Chinese food restaurant to order dinner was seen as a treat or a last-minute dinner option for busy families. While this segment of the market is still the largest in the industry, consumers are moving away from stores that aren’t building a digital presence. Ordering on the phone based on a tri-fold brochure menu has been replaced by scanning the restaurant’s online menu or placing an order directly on their website. This gives customers access to customize their orders and better predict the final price of their order. For time-conscious consumers, many website-based ordering systems have a ‘track my order’ function to allow customers insight into the process that it takes to get their food from ingredients to their door. While the traditional food delivery method still dominates the industry, new players are taking advantage of opportunities in connecting smaller restaurants to consumers, on-the-go millennials, and quick lunch options.
New Digital Ordering and Delivery
While many quick-service companies like Starbucks, Domino’s and Chipotle are opting-in to build their own mobile platforms to capitalize on this trend, some companies are choosing to partner with food delivery companies like UberEats to offer their food to a larger audience. According to Business Insider Intelligence reports, mobile orders is predicted to grow into a $38 billion industry, while making up 11 percent of all quick-serve restaurant sales by 2020 in North America. Overall, the presence of foodtech companies in metropolitan cities like UberEats, Just-Eat, Skip the Dishes, and Foodora, is growing more now than ever within the $97 billion market globally. These companies allow you to place an order on their mobile app from your favourite local restaurant, then deliver the food directly to your door for a small delivery fee. This allows smaller restaurants the opportunity to deliver food without having to build out their own infrastructure and hire delivery personnel.
The introduction of mobile apps focused on ordering food for pick-up, as opposed to delivery is changing the game of the digital ordering and delivery industry. Companies are taking advantage on-the-go consumers who are willing to walk to their favourite restaurant or pick-up food in passing, but do not have the time or patience to wait in long lines. Toronto-based food ordering app Ritual is taking advantage of this sector and has just raised an additional CAD $90 million in Series C. Ritual places an emphasis on colleagues and coworkers grabbing food from their nearby food court or eatery before heading back to the office. They partner with hundreds of restaurants allowing customers to skip the line and take advantage of promotions. Similar to Ritual, other tech companies are looking to solve various problems in the food industry. Whether it be improving pricing, adding convenience, or reducing food waste, the industry is rapidly growing with new players entering the market often.
Case Study: Feedback
Feedback is a mobile platform that applies dynamic pricing to the restaurant industry in order to create a win-win-win solution for diners, restaurants and society. Feedback offers smart pricing at certain times of the day for customers, allowing restaurants to reduce their food waste. Similar to other mobile ordering companies, Feedback focuses on partnerships with local restaurants and chains, allowing consumers to order on their app and pick up their meals in-store. However, on Feedback customers can get up to 70 percent off their meal based on time-sensitive offers. As a McGill alumni, the Co-Founder showed off their company at enLIGHT’s 2018 Demo Day!
While many restaurants are choosing to partner with existing apps, other companies are building out their own mobile ordering platforms. Companies like Starbucks and Tim Hortons give you the ability to order on their own app, with areas for mobile pick-up in store. By processing payments faster through the mobile app, there are less customers waiting in line for their orders to be taken, increasing sales per hour. This also decreases the average wait time for customers, allowing for an increase in overall customer satisfaction. Furthermore, customer usage data can be leveraged and analyzed to better understand customer payment and consumption patterns, in which the company can offer tailored promotional offers to personalize purchase incentives.
Case Study: Starbucks experiences a down-side of mobile ordering
Starbucks released their mobile ordering function through their app in 2015. By early 2017, they experienced a 20 percent increase in mobile payments and orders during peak hours. However, many customers were turned away by the overcrowded Starbucks stores. While some may prefer Starbucks as a quick grab-and-go station, others prefer to catch up with their favourite baristas as they handcraft their specialty lattes. Customers in-store began to experience longer than normal wait times as mobile orders were prioritized, causing some customers to choose to leave the store due to long wait times.
Globally, the mobile ordering and delivery industry is vastly expanding, replacing traditional phone-based ordering solutions. The Canadian market in this sector is bringing unique solutions to the table, and succeeding alongside global companies operating in Canada.