The delivery market has grown exponentially.
The aggregators of food deliveries are huge operations that on the one hand make many foods accessible to the customer and on the other hand increase the sales of the restaurants they serve.
To a bystander, this can be perceived as a win-win situation, where everyone benefits – the customer who gets excellent service at a reasonable price, and the restaurant, which is able to market too many more households.
Yet a closer look into the matter reveals a number of problems on both sides:
The customer has two options to order delivery – either from a restaurant or from a fast-food establishment.
Ordering delivery from a restaurant is not a substitute for dining-in, which provides greater entertainment, usually lasts longer, includes table service and dishes are received according to the diner’s instructions.
When delivered by a food aggregator, the food is packed in boxes, not as hot as in a restaurant, all the dishes arrive together, the customer has to clean and get rid of the leftovers and garbage and all this for the same price as was paid in the restaurant.
It may be convenient for the customer, but expensive. The frequency of eating in restaurants is not high and therefore delivery of food from restaurants in the future will not dramatically change the demand for food deliveries from restaurants. as this will dramatically increase the expenditure on food.
The second option is fast food and here the story is different. The consumer is accustomed to purchasing such food via delivery; He knows what to expect and the price is set accordingly.
The aggregators earn a commission derived as a percentage of the bill.
The larger the bill, the more they earn, hence they prefer deliveries from restaurants, where the average order is larger than with fast food.
In practice, this is not the case, and fast food holds most of the traffic, making the business less economical for them.
Those who have initially been hit the hardest by the aggregators are the fast-food chains with lost deliveries and sales it is quite clear that one comes at the expense of the other and if new foods are made available to the consumer through delivery, it comes at the expense of the chains that are not sold on the portal.
Fast food chains’ use of aggregators as a replacement for their delivery system amounts to a kill-pill for the brand.
A consumer who grows accustomed to purchasing food through the aggregators’ delivery app will not go back to purchasing through the brand’s app, thus effectively severing the contact between the customer and the brand, leaving the aggregator as the one who determines what the customer will see. Moreover, in the absence of an independent delivery system, any price that the aggregator sets is no longer too high, because the alternative is simply not to sell!
We can already see how the aggregators are able to steer the customer to brands they prefer, similar to Amazon on its platform and many other service providers that control ordering systems
Eventually, successful aggregators will replace existing brands with their own brands and form real competition.
The body that communicates with the customer and through which the purchase is made will ultimately totally control the entire chain. It’s inevitable and is happening in front of our eyes at this very minute.
In conclusion, we can foresee that eventually the aggregators will converge into the Pareto funnel, and that the long tail will not really succeed here either. Most of their turnover will be from fast food businesses and mostly from chains rather than from restaurants.
A second point is that aggregators like Google will decide who sells through them, where they will be indexed according to the aggregators’ business considerations – essentially determining “who will live and who will die”.
A third point is that although the aggregation business currently seems to be a virtual a gold mine, it is clearly not. Within the existing commission structure, given the current model, without building independent brands, the aggregators have no chance of making profits over time and certainly do not justify existing market values.
If however the aggregators use their power vis-a-vis the consumer now, and build an independent food supply that their ordering system will serve, then we will see the fast food market change and the power centers deliveries will gradually move into new hands.