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Measuring Success: Essential Metrics for Food Delivery Businesses

Food Delivery as a Business Model

Food delivery has become an essential part of modern life. With an increase in the number of people living in cities, there is a growing demand for quick and convenient food options.

This has led to the emergence of food delivery as a viable business model. In this article, we will explore the history and evolution of food delivery, market growth and projections, and different food delivery business models.

History and Evolution of Food Delivery

Food delivery is not a new concept. It dates back to the early 20th century when milkmen would deliver milk to homes.

By the 1940s, pizza delivery had become popular in the United States. However, it was not until the 1990s that food delivery became widely available, thanks to the internet.

The first online food delivery company was Food.com, which launched in 1997. However, it was not until the early 2000s that companies like GrubHub, JustEat, and Delivery Hero started to gain traction.

These companies acted as online marketplaces, connecting consumers with restaurants that offered delivery services. In recent years, third-party apps like DoorDash, UberEats, and Deliveroo have dominated the food delivery market.

Market Growth and Projections

The online food delivery market has seen significant growth in recent years. In 2017, the worldwide online food delivery market was valued at $17.1 billion.

By 2023, it is projected to be worth $24.5 billion, representing a growth rate of 5.39% between 2018 and 2023. The Asia Pacific region is the largest market for online food delivery, accounting for 55% of the market share.

Europe and North America follow, with 30% and 15% respectively. The growth of the online food delivery market can be attributed to factors such as changing consumer habits, increased smartphone penetration, and the rise of on-demand services.

Platform to Consumer Model

The platform to consumer model is the most popular food delivery business model. It involves third-party apps that connect consumers with restaurants that offer delivery services.

These apps charge a commission on each order placed through their platform. DoorDash is one of the largest players in the platform to consumer food delivery market, with a market share of 45%.

It operates in over 4,000 cities in the United States, Canada, and Australia. UberEats is another major player in this segment, with a market share of 25%.

It operates in over 45 countries worldwide. Deliveroo is a UK-based platform to consumer food delivery company that operates in over 200 cities worldwide.

Unlike its competitors, Deliveroo operates its own fleet of delivery riders.

Delivery Service Aggregators

Delivery service aggregators, also known as online marketplaces, connect consumers with restaurants that offer delivery services. However, unlike the platform to consumer model, the delivery service aggregator model does not involve a commission-based business model.

Restaurants pay a monthly or annual fee to be listed on the aggregator’s platform. JustEat is the largest delivery service aggregator in the world, with a market share of 34%.

It operates in 15 countries and has over 24 million active users. Delivery Hero is another significant player in this market, with a market share of 17%.

It operates in 40 countries worldwide and has over 20 million active users.

Conclusion

Food delivery has come a long way since the days of milkmen delivering milk to homes. With the rise of the internet, food delivery has become a viable business model.

The market has seen significant growth in recent years, with the Asia Pacific region being the largest market. The platform to consumer model and delivery service aggregator model are the two most popular food delivery business models.

As the demand for convenience continues to rise, the food delivery market is expected to grow even more in the coming years. Delving further into food delivery business models, we will take a closer look at the full-stack model and restaurant to consumer model.

Additionally, we will examine the pros and cons of operating a food delivery business.

Full-Stack Model

The full-stack model involves a company that operates both the platform connecting consumers to restaurants and its own in-house food preparation and/or delivery service. This model gives full control to the company over the entire food delivery process, allowing for better quality control and customization of delivery options.

One example of the full-stack model is the rise of ghost kitchens and cloud kitchens. These are kitchen facilities that are used solely for the preparation of food for delivery, with no dine-in option.

These kitchens allow for a reduction in overhead costs, as they are often located in cheaper rent locations. Delivery-only restaurant chains like Sweetgreen and Reef Technology have emerged using this model.

Restaurant To Consumer Model

The restaurant to consumer model involves delivering food directly from a restaurant to the consumer, without the involvement of third-party apps or delivery services. This model is typically used by larger restaurant chains like McDonald’s, Burger King, and Domino’s.

One advantage of this model is that it can allow for greater innovation and customization of delivery options. For example, McDonald’s has been testing drone and robot deliveries in various markets.

However, the restaurant to consumer model requires an investment in the development of in-house delivery infrastructure, which can be costly.

Pros and Cons of Operating a Food Delivery Business

Advantages

One advantage of operating a food delivery business is product stickiness. Once a customer has set up an account and provided their details to a food delivery service, they are more likely to continue using the same platform for future orders.

Additionally, the network effects of a popular food delivery service can lead to an increase in orders as more restaurants and customers join the platform. Another advantage is supply prioritization.

Food delivery services can prioritize higher-margin orders over lower-margin ones, leading to increased profitability. Additionally, pricing monopoly allows food delivery services to set their own delivery fees, which can be adjusted based on supply and demand.

Finally, food delivery services have no legal commitment to drivers. This flexibility allows for easy scalability and cost-cutting options.

Disadvantages

One significant disadvantage of operating a food delivery business is the high operating cost. Food delivery businesses need to invest in technology, marketing, customer service, and delivery infrastructure, leading to a high overhead.

Another disadvantage is operational complexity. With multiple stakeholders involved in the food delivery process, including restaurants, customers, drivers, and delivery platforms, there are many potential points of failure that can impact the delivery experience.

Finally, as the food delivery market becomes increasingly crowded, competition has become fierce. Food delivery platforms need to offer competitive pricing while balancing the need for profitability, leading to a difficult balancing act.

Conclusion

Food delivery is a rapidly evolving market, with different business models each offering unique advantages and disadvantages. The full-stack model and restaurant to consumer model have emerged as viable options alongside the platform to consumer and delivery service aggregator models.

Despite the potential for high operating costs, operational complexity, and competition, the rise of food delivery services is showing no signs of slowing down. As the market continues to evolve, it will be interesting to see what new models and innovations emerge.

In order to measure the success of a food delivery business, it is important to track essential metrics and key performance indicators (KPIs) that can provide insight into various aspects of the business. In this article, we will explore platform KPIs, driver and restaurant KPIs, and customer KPIs.

Platform KPIs

Total amount of orders is a crucial metric to track, as it provides an overall indication of the volume of business being conducted through the platform. This metric can help businesses identify trends, such as changes in order volume during peak hours or changes in order volume per day.

The average number of deliveries/orders per hour is another important KPI that can help businesses assess their ability to handle peak times and the volume of orders they can fulfill within a given time frame. This metric is especially relevant for food delivery businesses that operate during specific hours or have limited resources.

Average profit per delivery provides insight into the financial viability of the business. This KPI considers all the costs involved in delivering an order, such as food cost, labor, and delivery fees, and weighs them against the revenue generated by the order.

Driver and Restaurant KPIs

Average order duration is an important KPI that can help businesses assess the efficiency of their delivery operations. This metric considers the time it takes for drivers to accept an order, pick up the food, and deliver it to the customer.

Percentage of drivers on order/idle provides insight into the demand for drivers and the efficiency of driver allocation. This metric considers the percentage of drivers who are currently on an order versus those who are not currently assigned to a delivery.

Number of support tickets is a KPI that can help businesses identify areas where improvements can be made in order to reduce the number of customer support requests. High volumes of support tickets can indicate issues with the platform, delivery operations, or customer service.

Customer KPIs

Churn rate is an important KPI for food delivery businesses, as it measures the percentage of customers who stop using the platform over time. This metric can help businesses identify areas for improvement in order to retain customers.

Customer lifetime value (CLV) is a KPI that predicts the total amount of revenue a customer is likely to generate for the business over their lifetime. This metric can help businesses assess the profitability of their customer base and identify areas where customer relationships can be strengthened.

Net promoter score (NPS) is a KPI that measures customer satisfaction and loyalty. This metric asks customers how likely they are to recommend the platform to others on a scale of 0-10.

A high NPS score can indicate a positive customer experience and strong brand loyalty.

Conclusion

Tracking essential metrics and KPIs is crucial for measuring the success of a food delivery business.

Platform KPIs, driver and restaurant KPIs, and customer KPIs provide valuable insight into the volume of business, operational efficiency, and customer satisfaction.

By using these metrics, businesses can identify areas for improvement and make data-driven decisions to ensure long-term success. In this article, we explored the essential metrics and key performance indicators (KPIs) for food delivery businesses.

We discussed platform KPIs such as total amount of orders, average number of deliveries/orders per hour, and average profit per delivery. We also examined driver and restaurant KPIs including average order duration, percentage of drivers on order/idle, and number of support tickets.

Additionally, we explored customer KPIs such as churn rate, customer lifetime value (CLV), and net promoter score (NPS). These metrics and KPIs not only provide valuable insights into the success and efficiency of a food delivery business, but also allow for data-driven decision-making to improve operations and customer satisfaction.

By carefully tracking and analyzing these metrics, food delivery businesses can ensure long-term success and provide excellent service to their customers.

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