Third-party delivery from restaurants has been growing in popularity since it first really emerged as a nationwide option about six years ago. The pandemic put that service on overdrive. But then it kept going even since then. Orders at DoorDash, for instance, grew 19% last quarter.
We’ve long wondered why, given consumers’ general rejection of rising prices. This is a cut-back environment right now. More than three-quarters said in a McKinsey survey, for instance, that they plan to buy cheaper stuff in the coming months.
But a study for Restaurant Business by Intouch Insight on third-party delivery provides some insight into that, something we discussed on this week’s podcast and in the most recent edition of The Bottom Line newsletter.
In short, consumers like easy. And they’ll pay for it.
Convenience has long been a winning ingredient in the restaurant space. People are busy and don’t have time to cook.
Their need for ease and convenience has driven the growth of chains, in part because there is a simplicity in knowing the quality and price of a restaurant before you get there.
It has driven demand for drive-thrus, driving the success of fast-food chains and some fast-casuals.
Many of those fast-casual chains generally avoided such lanes, at least in part to differentiate themselves from their quick-service cousins. But more are getting on board with that, given consumers’ preference for using those lanes.
Demand for convenience and simplicity drove much of the success of Domino’s before the pandemic, as it highlighted its ease of use to get customers.
Customers typically pay an additional $8 or so for an order on one of the apps, between higher menu prices charged by the restaurant and various fees from the services themselves, according to the Intouch study. These prices drive up the cost of the order.
But there is value in what delivery services have to offer. For one thing, there is the fact that a person who orders delivery doesn’t have to leave the house. For late-night consumers or busy families, that extra few bucks is worth it when they don’t have to get dressed and get in the car.
At the same time, the apps themselves are easy to use. Nearly every customer in the Intouch study said it was easy to use the apps from DoorDash, Uber Eats or Grubhub.
Effectively, the apps are places where customers can shop for the night’s meal from a selection of restaurants, similar to the way Amazon has changed the way a person shops for socks or television sets.
Maybe the most telling statistic comes from Papa Johns, which started using third-party aggregators in 2018, before any of its rivals did so. Third-party delivery now represents 15% of its sales, even as sales through its own delivery channels have stumbled.
Papa Johns is as easy as it gets when it comes to ordering a pizza. And yet 15% of its customers (or so) are willing to pay more just to be able to use an aggregation app to order their pizza.
It remains to be seen how much of the restaurant business third-party delivery becomes responsible for.
But it’s also evident from the study that such companies are getting better, as highlighted by the 90% satisfaction with restaurant delivery—far better than convenience store delivery, which is newer and, according to the Intouch results, more problematic.
We were long skeptics about third-party delivery in the U.S., for a variety of reasons—the presence of the drive-thru, the inability of the companies to make a profit, the logistical challenges of the service and, of course, its cost.
We were clearly wrong. Easy works. As it always has.