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Why the shift to delivery might not last

A new study found that many consumers replaced dining in with delivery last year—a trend that reversed as restaurants reopened.
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Consumers replacing dine-in visits with delivery was the driving force behind delivery's sales growth last year, according to a new study that foresees a difficult road ahead for the service post-pandemic.

What's more, a majority of that growth came from existing customers, not new ones. And more Americans staying at home—largely viewed as a boon for delivery—actually hurt sales, the study found.

Before the pandemic, delivery sales were on a negative trajectory as user levels and retention slowed, according to the study published this week by Elliot Shin Oblander, a doctoral student at Columba Business School, and Daniel McCarthy, an assistant professor of marketing at Emory University. The pandemic and ensuing restrictions on dine-in service reversed that trend: Delivery sale increased to $50.6 billion in 2020 from $22.7 billion the year before, with the pandemic accounting for a whopping 69% of that growth, the study said.

But, because most of the surge was related to pandemic restrictions on restaurant dining, "sales growth is likely to fall should government dine-in restrictions be lifted and dine-in activity revert back to pre-pandemic levels," the researchers wrote.

Those bullish on the future of delivery would counter that people have gotten used to the convenience of the service and that restaurants reopening won't change that. The study, however, calls that belief into question. It found that as restaurants began to reopen, people started replacing delivery occasions with dine-in visits again.

"If habituation had been a dominant factor over the reopening period, we would not have observed such strong substitution away from delivery back to dine-in on the margin," the researchers wrote.

The study dispels some other conventional wisdom about pandemic-era delivery trends, t00. There has been much ado about the massive adoption of delivery during the pandemic by people who never used it before, but the study found that it was existing users who contributed most of the sales growth.

Of the estimated $19.3 billion in delivery sales generated by the pandemic last year, 84% came from pre-COVID delivery customers who ordered more food, more often, and not simply a larger customer base, the study found.

And more people staying at home had an overall negative impact on delivery sales. Stay-at-home behavior led to greater delivery adoption and larger ticket sizes, but also lower order frequency, the study found, which reflects a couple of trends: Households ordering food for the whole family likely drove higher order totals, for instance. At the same time, former commuters working from home might have used that extra time to cook rather than order food like they once did.

The study's dim outlook for delivery has not manifested thus far in 2021, as the service is going strong through the first quarter of the year. Grubhub, for instance, reported record gross food sales and daily average orders across the first three months of 2021, and many restaurants have said delivery levels have been stable even as dine-in business returns.

There are several factors in play that might be helping delivery. A majority of Americans are not yet vaccinated and could be still avoiding on-site dining. And many people received $1,400 federal stimulus checks in the first quarter, which has likely boosted restaurant spending, particularly on pricier options like delivery.

The study is based on data from  multiple sources, including credit/debit card transactions at 27 restaurant delivery companies from nearly 2 million consumers between Jan. 1, 2016, and Dec. 31, 2020; mobile location data for 18 million devices; and dine-in activity across 945 restaurants.

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