If there is one thing to say about our last three articles on delivery apps, they’re pretty critical. Don’t get me wrong, being constructively critical is a good thing, but overly critical is not. We don’t want to fall into a spiral of constant negativity and end up like Anton Ego from Ratatouille. So let’s switch it up and explore 5 trends that we find exciting in the world of food and grocery delivery right now.
1. Ghost Kitchens
It’s not as spooky as it sounds, but ghost kitchens are an interesting concept, to say the least. Ghost kitchens are food preparation and cooking facilities that function purely for delivery-only meals, take-out meals, and drive-throughs. They don’t have a storefront, a dine-in option, waiters, or even parking. They are not tied to a specific restaurant brand either, they are simply a kitchen space that contains facilities for more than one restaurant to use. Hence the name. Where can you find one? That depends, but since there isn’t a need for them to be presentable as restaurants, many ghost kitchens are located outside city centers, like in fixed-up industrial complexes/warehouses. Being located outside the high-rent areas of city centers and other high-traffic urban areas also means they are kinder on costs.
Ironically, we have no clue when the first ghost kitchen was established (get it? No? Just me?), but we do know that they grew enormously popular adjacent to delivery apps during the COVID-19 pandemic. When restaurants were forced to close down their dining rooms, some opted for ghost kitchens to continue their business, and followed a delivery-only model. It proved to be a successful alternative/transition for many restaurants. Ghost kitchens provided the opportunity for new businesses to start at a lower cost than opening a restaurant in a city center. They could directly begin with delivery-only meals while using a ghost kitchen. Larger restaurant establishments saw the benefits too. Chains like Chuck E. Cheese experimented with new menus and dishes by using ghost kitchens under a different name, Pasqually's Pizza & Wings.
The growing usage and expansion of ghost kitchens have helped facilitate the increasing demand for delivery that we’ve seen in recent years. In conclusion, it’s had a pretty positive impact, particularly for smaller and younger businesses that would have either struggled or shut down during the pandemic.
2. Delivery apps x Grocery stores
Delivery apps and grocery stores are starting to work together. Why? Well in the case of the Netherlands, it’s all about these dark stores.
Dark stores are distribution centers used by fast delivery companies to pick up orders for delivery. In the Netherlands, they have had backlash for a variety of reasons. This includes noise complaints, traffic congestion, bike nuisance, and being open after regular shop hours. In Amsterdam, dark stores are located in residential areas and shopping streets of the city, causing a headache for zoning planners and an array of complaints from residents. In reaction to this, new regulations and bans preventing delivery apps from opening more dark stores are being introduced. To work around this, delivery apps are now working with supermarkets so couriers can pick up orders at store locations instead.
A good example of a recent collab between delivery apps and supermarkets is Gorillas x Jumbo. 9 months after launch, Gorillas reached unicorn status. The delivery app is one of the most popular in the Netherlands, and supermarket chain Jumbo took notice. They saw the changing market preferences and took the opportunity to work with a popular and fast-growing delivery app to meet consumer preferences. And for Gorillas, with the ever-mounting restraints on dark stores, it's one way to work around the issue.
Competitors of Jumbo made similar moves. Albert Heijn and Spar joined forces with food delivery apps, Thuisbezorgd.nl and Deliveroo. With that collaboration, both delivery apps now operate as food and grocery delivery apps, bringing them in direct competition with Gorillas.
This trend may have surprised a few people, given how delivery apps went from industry disruptors to collaborators, but the change in the relationship between supermarkets and delivery companies will be interesting to see develop in the future. The ban on dark stores will have a profound impact on the way companies like Gorillas, Getir and Flink operate in the Netherlands and this may start trending in other countries too. If so, the relationship between supermarkets and delivery companies will be important for their survival under new laws affecting their business models.
3. Q-commerce & drones
Q-commerce is the 3rd generation of commerce, where delivery of food and groceries is done just a whole lot faster. You’ll be familiar with the concept, we’re talking last-mile delivery, dark stores, two-wheeled transport, and a small selection of popular products like your late night chocolates, ice cream, or things needed to finish a recipe. With the pandemic mainly in the rearview mirror and with the law changes that we’re seeing in countries like the Netherlands, the way q-commerce operates now is likely to change. So, what will the 4th generation of q-commerce look like?
Grocery and food home delivery is popular, this is common knowledge by now. And it’s so popular that delivery companies are having a hard time keeping up. Fast delivery is no longer considered a “nice to have”. Consumers expect it now as part of their online ordering experience.
Last-mile delivery achieves bringing orders fast, but it’s also expensive. It’s actually the most expensive and time-consuming step in the delivery process. Almost 53% of total shipment cost in the industry comes from last-mile delivery alone. Does that make it a viable business model then? I’m not qualified enough (I think) to answer that and draw conclusions with confidence but I’ll tell you this: if there is a way to reduce costs and uphold the last-mile service, companies will explore options. We’ve entered an instant-needs economy, so the future of commerce is “instant” delivery. There will be those who adapt and survive and those that will disappear, but q-commerce will not regress.
Let’s talk about drones. Are we serious? Yes. Part of the reason last-mile delivery is expensive has to do with costs spent on couriers. If delivery companies are looking for driverless solutions to cut down on that cost, why shouldn’t we talk about drones? No, we’re not saying replace man with machine, so put down the pitchforks and let us explain.
Since 2019, UberEats have been experimenting with drone delivery, using predetermined drop-off points just before the order is placed. Once an order is finished and loaded onto a drone, it will fly over to a drop-off point, be collected by a courier, and delivered to the consumer's door. Yes, the process of delivery here has a few more steps but it does reduce the distance a courier has to travel, which reduces the cost spent on courier trips.
That being said, we're aware of the drawbacks to drone delivery. The application of drones in urban/urban-adjacent environments will be hard to materialize. Just thinking of delivering with drones among high-rise areas and bad weather will already provoke skeptical thoughts about the idea. For the suburban market, the conversation is different. There is a future for drone delivery in those areas, but we’re still a few years away before that can be realized. Whatever happens, it will be worth it to see which delivery companies will begin and or continue to invest in the idea of drone delivery.
4. Social media x delivery
This isn’t a discussion about super-app-level integration, we’re not there yet. But Instagram has had a feature that allows restaurants to add an “Order Food” button to their page and stickers to their stories. Restaurants can choose which partner they’d like to work with (country dependent), and customers will be sent to the delivery page and the specific product shared on their Instagram feed. With Instagram having a storefront for other products already, would they consider adding delivery-only food and grocery products? It remains to be seen.
TikTok has taken strides in food delivery. At the end of 2021, the social media giant announced that in collaboration with GrubHub and Virtual Dining Concepts, they’ll be opening delivery-only restaurants (ghost kitchens) across the United States. It will be known as TikTok kitchens and their menu will consist of TikTok’s most viral dishes, which people can have delivered to their homes via GrubHub. The plan is to open 300 of these delivery-only restaurants with a menu that will be updated quarterly in coordination with dishes trending on the app. TikTok stated that this is more of a marketing campaign than their attempt to enter the restaurant business but who knows what could happen. The platform has over a billion users, so if successful, this campaign might spark interest for them to consider entering the restaurant and delivery business.
5. The future of combating fees: time to re-evaluate the model?
Getir, Flink, Instacart, and Gorillas all have one thing in common, they’re trying to be profitable through delivery and service fees. It’s one of the major complaints customers have when using delivery apps. In our own survey, consisting of 500 responses, expensive fees ranked highest amongst the types of problems clients faced with delivery apps. 42.6% of respondents selected it ahead of orders arriving late, lack of customer service, and battery drainage. No one likes to pay a delivery fee that costs more than what they’re ordering, and it’s again a reason why last-mile delivery is costly. The future of these companies relies on how they’ll approach solving high fees.
One idea could be turning to a subscription-based model. This way, subscribers to a food/grocery delivery company will pay fees upfront, be entitled to orders delivered to their home for the given period, and won’t need to pay extra delivery charges. This is good news for couriers because they’ll have the chance to work on a fixed salary, so they don’t have to rely on tips as much. We won’t delve into the idea too deeply because that could be a lengthy blog topic on its own but we think it’s worth mentioning as a potential emerging trend and solution to a problem. If you’d like to read more about it in the meantime, here’s some “light" reading on the subject.
A proven profitable model in e-commerce is the first-party model. You only need to look at Amazon as an example of why. They’ve built a successful e-commerce business based on this model, and so much so that Mr. Bezos is flying in his own spaceship on weekends nowadays. The first-party model can work for delivery, and GoPuff has proven this. Co-CEO of GoPuff Rafael Ilishayev has said, instead of relying on delivery and service fees, GoPuff owns the goods, warehouses, and the entire end-to-end consumer experience. They monetize their products, not their people, and make their margins on the goods. It’s a proven model that has already worked for one delivery service, so why not for others? I’m sure it’s easier said than done but it’s a more than valid approach to consider.
Tips for the courier?
So there it is, the 5 trends we find exciting in the world of food and grocery delivery. If there was anything we missed or if you have any comments, suggestions and questions, feel free to reach out to us on our Twitter and LinkedIn.