First-party restaurant ordering seems to be having a moment.
For years now, restaurants have been trying to get online customers to order directly from their websites or apps, rather than from a third party like DoorDash or Uber Eats.
This has been an uphill battle. Third-party apps offer selection and convenience, and during the pandemic, consumers got into the habit of using them. They also have Super Bowl-sized marketing muscle. And they continue to grow.
Despite those advantages, there have been signs of momentum in the first-party channel recently.
Take a recent report from tech supplier Qu, which found that 40% of restaurant brands believe first-party digital orders will drive the most revenue growth for them this year. That’s far more than catering (24%), on-premise (14%), drive-thru (11%), third party (7%) and kiosks (4%). The responses are based on a survey of 170 limited-service brands.
This indicates that restaurants, particularly limited-service restaurants, firmly view first-party digital ordering as the future.
As a reminder, there are a few reasons why restaurants value first-party orders so heavily. When customers order directly, restaurants get to keep the transaction data. These orders are also typically more profitable because the restaurant isn’t paying as much of a commission to an intermediary. And the restaurant gets more control over the ordering experience.
During the early part of the pandemic, restaurants would take orders from wherever they could get them. Third-party marketplaces became a life-saver. But as the dust has settled, restaurants have put more energy into growing their first-party channels. They have invested in things like loyalty programs and mobile apps and have kept prices lower for customers who order direct.
Now those investments seem to be bearing fruit.
Thanx, a provider of restaurant loyalty programs, said that nearly two-thirds of its customers are seeing first-party ordering grow faster than third-party as a share of digital sales. “Loyalty programs and exceptional first-party experiences are driving that shift,” said Chief Data Officer Aaron Newton in an email.
Consumers have long said they prefer to order directly from restaurants. In a recent report from TouchBistro, the preference was overwhelming: A combined 31% of consumers said they usually place to-go orders on a restaurant’s app or website, compared to just 13% who use a third party.
Of course, what consumers say does not always match what they do. But a few factors might be causing them to actually shift their ordering behavior.
One is that restaurants are improving the first-party ordering experience, as noted above.
Another is inflation. Consumers are fed up with high prices at restaurants, and they are especially tired of paying for the markups and fees that come with third-party delivery. First-party ordering offers a similar level of convenience, but usually at a lower price, both in terms of menu prices and fees. And the customer may be able to earn loyalty points or special offers in the process, which adds another incentive.
“Uber Eats and DoorDash are very convenient, but you pay for it,” said one consumer surveyed by TouchBistro. “By the time you’ve paid the service fee, the delivery fee, and the tip for the driver, you realize that it’s a lot less costly to just order directly through the restaurant and pick it up.”
It’s not as if third-party ordering is going away. Those platforms continue to invest in consumer-friendly features that restaurants can’t match, such as the ability to have restaurant food and groceries delivered in a single order. And there is still convenience in not having to have a dozen different restaurant apps and corresponding logins on your phone.
In most cases, DoorDash and Uber Eats are still the ones actually delivering first-party orders. And they clearly view it as an important source of growth as well. The two companies compete hard for first-party contracts, enough so that Uber took DoorDash to court over it this year.
“It’s one of the fastest-growing parts of our business,” Uber CEO Dara Khosrowshahi told analysts in October, according to a transcript on financial services site AlphaSense.
That’s good news for Uber, and great news for restaurants.