The Opportunities and Challenges of the Online Food Market
The Food Delivery Market has seen dramatic ups and downs in the last three years. The financing to the industry has been fluctuating like the emotions of a teenager. Between 2012 and 2014, food delivery financing witnessed a lull in capital inflows. Since the beginning of 2014, financing in the food delivery industry skyrocketed, amassing a total of $1959M for the whole year, compared to a seemingly paltry $304M in 2013! If you think that rise was mammoth, wait till you hear what happened the year after that. The trend of a vertical rise continued, with financing reaching –wait for it – a whopping $5,559M in 2015! You don’t see spikes like that everyday!
However, the fairy-tale of financing was not to continue unperturbed, as the figure dropped dramatically once again, to $626M in the first quarter of 2016 and to $320M in the second quarter. This is the lowest it has been since Q1’14! So far this year, Food Delivery start-ups have only raised $946M. Who would have guessed, right?
The State of The Food Delivery Industry – Opportunities Galore!
While the financing story tells the tale of a depressed Food Delivery Industry, I would like to bring your attention to some details of the market instead. These details will not only help explain the fluctuations, but also re-frame the image of the industry that the financing trends convey.
First, let us look at what caused the hormonal spike in 2014-15. While it may look like the market must have been saturated during these years, the truth is that the scope of growth in the online delivery market did not come close to being fulfilled! In fact, it was precisely in these years, that new food-delivery start-ups began to come up, and some like Blue Apron, DoorDash, Postmates and Munchery reached large valuations.
The spike in financing in online food delivery was due to the massive, unexplored potential of online food delivery in the US
Let us put this in perspective. The restaurant industry is one of the biggest retail industries of all worth $500Bn. Almost $210Bn of restaurant sales are made in off-premise sales. One would think that with almost half of all restaurant food eaten outside the restaurant, the takeout and delivery market would constitute a large portion of these off-premise sales. The reality is counter-intuitive.
The food takeout and delivery market combined was a $70Bn market in 2015, out of which online delivery constituted a meagre $9Bn (about 13%)! In 2016, it was predicted that the delivery and takeout market had reached $210Bn by Morgan Stanley, out of which the delivery market is thought to be a paltry $30Bn (about 14%). One would have thought that after the financing boom in 2014-15, this figure would have skyrocketed commensurately. However, in spite of a throng of new online delivery start-ups coming up and falling down in a competitive environment, the online delivery market is as far from being saturated as it is from being stable at this time. Oh, did I mention that the pizza industry alone makes up 60% of the total $210Bn dollar off-premise market? That effectively means, that if you take out pizza delivery from the $30Bn delivery market, the figure drops to only $4Bn (just 2%)! That is staggering!
Without Pizza deliveries, only about 2% of the $210Bn food delivery market is online!
The bottom line is that the online food delivery market is bustling with opportunities and is calling out to competent businesses to materialize a huge volume of opportunities! It is absolute common sense that Americans would like to order-in something apart from pizza! (and research surveys show this too). As of now, only about 5% of the restaurant delivery market is penetrated by online servicing. Compare that with 41% of the travel industry and 10% of the eCommerce industry, and you can imagine the potential. It doesn’t take a high-profile economist to know that convenience is king in the information age and there is nothing more convenient than on-demand everything!
The Need of the Hour is Competent Operations – Tookan Can Help!
Right, so getting back to the point after all this analysis. The bottom line is that there are endless opportunities for restaurants and food delivery services in the online food delivery market (even if you’re not making pizza!). The migration of all kinds of businesses to online platforms is happening at this very moment and it is only the beginning of this trend in the United States. So, if the food delivery market is visibly loaded with opportunities, what is needed to turn these opportunities into profits? The reality is that the market is highly competitive, as many start-ups see the potential and are coming around to exploit the potential. What is needed is competent business operations.
Competence, in the scenario of online deliveries translates into weeding out all the potential sources of inefficiency, thereby optimizing operations.
I’ve observed that optimizing an online delivery business can be broken down into various factors which are under the control of any businesses:
- Seamless Online Infrastructure
- Efficient management of orders and deliveries
- Optimal management of time
- Optimal management of fuel costs
- Efficient workforce operations on the ground
- Enhanced communication systems
- Good customer relations
Keeping these factors in mind, Tookan has been designed to build-in these key factors into the very foundations of your day-to-day operations. Tookan is a powerful, software-as-a-service platform which optimizes the operations of your food delivery business by weeding out common sources of inefficiency. Furthermore, it is flexible and can be easily customized to specific needs of your online delivery business. Tookan works by connecting the supply chain between the Owner, Field Workforce or Agents and the Customer through the latest cloud-based and map-based technologies. If you’re a restaurant owner or are in the business of delivering food in any manner, you would know that cloud-based food services have proliferated in recent times, making the customer spoilt for choice. The key to success in this environment is to leverage local deliveries to drive top line growth profitably.
The Tookan Web Dashboard and Mobile Apps include a host of features for the business owner, field workforce and customers which facilitates the migration of your delivery business into an on-demand, digital space. With Tookan, you can track and manage a mobile workforce, streamline orders and deliveries, and manage relationships with your clients.
So what all can Tookan do for your food delivery business?
1. Real-Time Tracking of your workforce: For efficient management, the owner/manager has to practically play god as far as day-to-day operations are concerned. The task of managing a live workforce, spread out throughout the area is nothing short of playing god. With the BIRD’s EYE VIEW feature, which is a map-based, real-time interface, you can literally see see and manage all operations from atop the clouds, as they unfold on your screen.
2. Route Optimization: At the heart of successful doorstep-deliveries management is efficient unit economics. If you cannot ensure the least possible delivery time on each delivery, maximize the number of potential deliveries in a day and minimize fuel and time costs on each and every delivery, you can never hope to reach optimal efficiency in operations. The Route Optimization feature in Tookan is designed to optimize delivery rounds for your customers. The Tookan routing algorithm automatically plans your daily routes to save time, fuel and vehicle costs and maximising the number of deliveries per day.
3. Auto-Assign Orders: The Auto-Assign feature automatically seeks out the best person for a given delivery task and assigns the task accordingly. It does this on the basis of distance, batch, availability, direction, performance etc. This does away with the need to micro-manage every single delivery, which wastes a lot of time and money.
4. Apps for your Workforce: Each agent in the workforce gets a mobile app, which is crucial on the ground. Through the app, tasks can be directly assigned to any agent with just a click from the dashboard. Through this link, you can share all the important information needed by the agent to make the delivery. You can add specific instructions, receive customer signatures, map view, list view and calendar view for deliveries.
5. Manage Orders From Multiple Sources: In the information age, it is common to operate through a variety of sources like your Website, your direct line or email, restaurant aggregation platforms like GrubHub, etc. Managing orders from all these sources can be quite a task. Tookan can manage them for you!
6. Manage Multiple Orders at Once: You can view all your pending and upcoming orders at once. Further, you can assign these orders spread out over time frames and geographical areas manually with much more efficiency.
7. Real-Time Tracking for the Customer: The customer of the on-demand economy does not like to wait and keeping guessing when his food is going to arrive. Instant Gratification is the motto of success. Tookan sends all customers a link, which enables them to track their orders on a real-time map interface. Further, real-time customer notifications on dispatch, in transit and on delivery keep the customer better informed.
8. Automate Payments: Tookan can manage your payment flows, whether they are on the customer side interface or as Cash on Delivery.
9. Customer Relationship Management (CRM): With CRM, you can measure level of customer satisfaction, Improve your services based on reviews and improve your relationship with your customers. Knowing how your customers feel about your food and delivery is key to keep them coming back – more so in the food industry than anywhere else. You can know your customers on your dashboard and manage your database of customers.
10. Analyze Data for Smarter Decisions: Analytics give you the ability to gain meaningful insights from the data you collect from day-to-day operations. You can do both with Tookan Analytics.
The market for online food delivery is far from being saturated. There is a lot of scope for online delivery in the food industry. At the same time, the market is competitive and requires competence on your part. Tookan has been designed to do precisely this and can thus, help you out!