Restaurants’ delivery sales are projected to grow at more than three times the rate of on-premises revenue through 2023. And the majority of the growth will be in digital orders, according to a new report from L.E.K. Consulting.
“As consumers find themselves more and more pressed for time, online ordering from restaurants has captivated a diner demographic increasingly shaped by the sophisticated world of consumer ecommerce,” says Manny Picciola, Managing Director at L.E.K. Consulting and coauthor of Meals on Wheels: The Digital Ordering and Delivery Restaurant Revolution. “And millennials are a driving force behind the growth of digital ordering and delivery. We expect them to account for a full 70 percent of the at-home delivery business by 2020.”
Overall, digital delivery sales are expected to grow at a compound annual rate of over 22 percent through 2023, according to the L.E.K. research. In fact, more than half of delivery consumers now order food directly from the restaurant’s app or website. To keep pace, 37 percent of restaurants are offering online ordering and 32 percent accept mobile payments, according to industry statistics. Much of the rest of digital delivery orders are through third-party platforms like Grubhub, which reported 16.4 million active diners in the U.S.
Restaurants have three main platform options to handle digital ordering and delivery: an independent platform, branded and run by the establishment itself; a third-party platform, often an aggregator service (such as Grubhub) that handles order-taking and payment but leaves delivery to the restaurant; or a hybrid platform, which is some combination of both. The L.E.K. report points to the following challenges that restaurants must meet in order to stay successful in delivery:
- Consumer experience: A positive consumer experience – from order origination to tracking, delivery and service follow-up – is job one. Inconsistency is a key concern here.
- Technology. While online and mobile ordering makes things easier for the consumer, it requires significant back-end integration to ensure the system works with point-of-sale checkout, apps, promotional data and more.
- In-store operations. Careful management – like a dedicated floor plan for pickup – can help avoid disruption for in-store consumers caused by delivery and pickup orders.
- Supply chain. Efficient execution requires the right equipment and delivery infrastructure. An example is investing in insulated bags to keep meal delivers hot or cold.
- Staff. If delivery is secondary to other restaurant operations, a third-party platform might be the way to go. Otherwise, hiring dedicated delivery personnel and training them to fit the restaurant’s specific delivery goals are key.
“Digital ordering and delivery isn’t just pie in the sky for restaurants anymore, and market trends definitely seem to be bearing this out,” says Maria Steingoltz, Managing Director at L.E.K. and report coauthor. “While the right approach for a delivery system depends on the specific needs of the restaurant, it still all comes back to restaurant fundamentals. A deep understanding of logistics, food quality and consumer communications is what it really takes for restaurants to win in the digital age.”