Food delivery has become a very important part of the customer satisfaction strategy for restaurants and grocery owners, as customers now expect that anything they order can show up at their doors, quickly and inexpensively. But with the fear of losing customers, most restaurants and grocers charge much less fee for their delivery, which means that businesses have to sell a lot more per order so they can absorb these delivery costs. Increasing customers’ expectation has made it difficult for most restaurants and grocers to make revenues.
What are the economics of food delivery? It costs businesses an average of $10 an order to deliver food, but businesses only charge around $8 from customers. In addition, many grocers had to invest money to reconfigure their stores, installing coolers for delivery orders, creating checkout lanes for online shoppers and redesigning backrooms and parking lots. Also, groceries must be packaged carefully and sent in refrigerated trucks. Restaurants must pack meals in special containers and deliver in a short amount of time. To help fulfill orders, many restaurants have turned to delivery services, such as Grubhub, DoorDash, and Uber Eats. These third-party services currently handle 52% of online restaurant orders. While offering delivery is essential to keep convenience-seeking customers, food sellers pay services like Instacart an average fee of 10% to 25% on each order, which means the actual deliveries often lose money. Wall Street expects that online grocery sales will grow to around $86 billion in 2022 from $17 billion in 2017 and the sales of online restaurant delivery will grow to $62 billion in 2022 from about $25 billion today.