Is the Future of Restaurants Riding on Delivery Apps?

Is the Future of Restaurants Riding on Delivery Apps?

At a time when restaurants are struggling, apps like Uber Eats are getting stronger. The coronavirus pandemic has decimated the restaurant industry overnight.

The coronavirus pandemic has decimated the restaurant industry overnight. As lockdown measures were introduced, hospitality businesses were ordered to close their doors and were left with uncertain futures. With customers stuck at home, many restauranteurs found that their best option for survival was to turn into a delivery-only business.

Prior to the pandemic, the industry was already coming to terms with a growing demand for food delivery. The emergence of online ordering marketplaces like Uber Eats, Grubhub, and Deliveroo allowed diners to access thousands of restaurants on a single platform. Customers are able to select meals through an app and the company then places the order with the restaurant and arranges home delivery using its own drivers. On these services, restaurants can benefit from exposure to potential new customers and avoid the cost of providing an in-house delivery service, whereas users can take advantage of the greater selection of food options and convenient order system.

It’s estimated that online food delivery will grow to become a $200 billion business by 2025, so it’s not surprising that companies are fighting for a bigger slice. Uber has leveraged its global success in ride-hailing to cement Uber Eats in more than 670 cities on six continents. DoorDash, Grubhub and Postmates have also been major players in the U.S, whereas Just Eat and Deliveroo are the leaders in Europe. Even outside of the food industry, companies from autonomous vehicle manufacturers to fintech firms and robotics specialists are all designing products to try and get a piece of the action.

Yet, despite the pandemic-induced boom in deliveries, massive investments and huge revenues, even the most popular delivery businesses are losing money or barely breaking even. While these companies are battling it out for a dominant market position, they are swallowing losses on orders to stay competitive — Uber Eats currently loses around $1.10 per order and even once-profitable Just Eat has diluted its profits by moving into deliveries. Both companies are betting on reaching a point where they have a large enough market share to raise their prices and become profitable.

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