The food delivery market is booming. Research by Morgan Stanley projects that the total U.S. food delivery market could grow to as much as $210 billion over the long term, from around $11 billion today. By 2022, digital food delivery may comprise 11% of the total market, vs. 6% today. While takeout and delivery are most popular among QSR customers, a report by ResearchAndMarkets.com solidifies that QSR and take-out will lead the way for U.S. food service sector growth in the immediate future, another study, “Takeout & Off-Premise Dining Consumer Trend Report” by Technomic, found that takeout and delivery from fast casual, family restaurants, traditional casual dining as well as in the retail sector all showed significant gains over the least three years.
So, what exactly is fueling all this growth?
- Consumer Demand! Time-starved and convenience-seeking consumers have a growing appetite for having food delivered at home. According to one Morgan Stanley report, consumer interest in food delivery is up year over year; in the past three months, 51% of total U.S. diners and 77% of Millennial diners ordered delivery food either from a restaurant or a third-party delivery service.
- Technology! The rise of digital technology, in particular mobile, has, and is reshaping the market. Consumers have become accustomed to shopping online via apps or websites, with maximum convenience and transparency, and so have come to expect the same experience when ordering food. Mobile ordering is becoming a major part of the consumer purchase journey and recent figures indicate that nearly two thirds of Americans are already in the habit of ordering digitally via an app or website.
- Third-party delivery! Restaurant delivery and takeout options have also exploded in recent years, and according to Bloomberg and Forbes, food delivery services like GrubHub and UberEats are currently experiencing exponential growth. Online food-delivery platforms offer unprecedented variety, speed and convenience to the consumer with a single tap of their mobile. And for restaurants that want to reach consumers, especially via mobile orders, but prefer to shy away from the delivery business, these platforms are stepping in with the promise of boosting to-go business and solving operators’ off-premise headaches. Given the high fees of these services, it remains to be seen whether this is a wise path to business success.
While growth is good, research by Morgan Stanley indicates that online delivery growth could mean a greater risk of cannibalization and profit-margin pressure, particularly for casual eateries as nearly half of consumers surveyed indicated that they order in instead of going to a restaurant.
However, one slice of the market that may stay immune: pizza. “Our work suggests the overwhelming reason consumers purchase delivery pizza is that they are craving pizza,” John Glass, Morgan Stanley’s U.S. restaurant analyst.