You’ve probably heard that we’re in a K-shaped economy, in which higher-income Americans are spending freely while the less affluent are pulling back.
That’s certainly been the case for a lot of restaurants, which explains why many are pushing low-priced value offers for the third straight calendar year.
You’d assume the same would be true for restaurant delivery, where markups, fees and tips mean that you’ll pay up to twice as much for your meal than if you’d just gone and gotten it yourself.
It sounds like the sort of luxury reserved for society’s upper crust, along the lines of glamping and $20 smoothies. And it would explain why third-party delivery sales have soared in recent years while restaurant sales overall have been sluggish.
But some recent data shows that the exact opposite is happening: Lower-income consumers are the ones ordering the most food delivery—the same group that has been cutting back on their restaurant visits more generally.
The first bit of data comes from media site The Argument, which used AI to weave together credit card spending and demographic data to find out just who is ordering all that delivery. (You can read more about the methodology here.)
It found that households earning $30,000 to $50,000 a year order delivery nearly 12 times a year on average, compared to about eight times for those making $150,000 to $250,000.
Not surprisingly, that lower bracket also spends more on delivery annually: $427, compared to $323 for the higher earners, on average.
Drilling down further, The Argument found that low-income millennials in particular order an outsize amount of delivery. The biggest power users are 30- to 44-year-olds with household incomes under $50,000. They order delivery more than 18 times per year on average and spend $649 in the process.
So, while rich people may be fueling the economy overall, it appears to be lower earners—“broke millennials,” as The Argument puts it—who are supporting the fast-growing restaurant delivery business.
This is echoed in survey data from our friends over at Technomic, which regularly asks tens of thousands of consumers about their restaurant ordering behavior. Delivery usage is indeed skewing younger and poorer, said Robert Byrne, Technomic’s senior director of consumer research.
When asked about their most recent visit to a chain restaurant, a whopping 40% of millennials with annual household incomes under $50,000 said that visit was for delivery, per Technomic. A quarter of Gen Zers said the same.
It’s a pattern that defies conventional logic. With $5 combos and $3 burgers flooding the fast-food market, why would seemingly price-conscious people be taking the most expensive route for restaurant food?
One possible explanation is that lower-income people work long or off hours and perhaps even multiple jobs, which means they have less time to feed themselves.
This was a notion raised in the 2001 book “Nickel and Dimed” by journalist Barbara Ehrenreich, who spent a couple of years working a series of low-wage jobs and then wrote about it. One of her conclusions was that poor people often have to spend more on necessities like food because they may not have the wherewithal to cook for themselves.
As for hard data on whether poor people spend more on fast food in general, we found research supporting both sides of that idea.
But at least according to Technomic’s survey data, the framework for that conclusion is there. It found that lower-income consumers are both more price-sensitive and more likely to say that they often eat on the run.
“As a lifestyle/means of survival factor, time is a luxury that many lack,” Byrne said.
As for why millennials tend to overindex, I would suggest that they are in the thick of their child-bearing and -rearing years, meaning they may have more people not only to feed, but also to get to and from school, soccer practice, swimming lessons, etc. This may cause them to place an even greater premium on convenience.
But we should also note that overall, consumers are spending more of their food budgets at the grocery store than at restaurants, and that is especially true for low-income consumers. That’s according to federal data illustrated here by economist Mike Konczal.
That suggests that delivery users are replacing some of their in-person restaurant visits with delivery, which should be some cause for alarm for restaurants. Delivery tends to be more expensive for restaurants, just as it is for consumers, and restaurants also typically do not know much about who is ordering it, because third-party delivery services own that data.
So, what might restaurants take away from the above? The bottom line is that the group of consumers we think of as price-sensitive may actually be even more concerned with convenience. They may have less time and potentially more mouths to feed. Whatever the reasons, they are turning to delivery far more often than other people.
It’s hard for the average restaurant to beat the convenience of delivery. They have a definite edge on price, and they can always find ways to be faster.
But even that may not be enough to sway consumers who have gotten used to the frictionless ease of delivery, despite what it might mean for their bank accounts.