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Challenges that online food delivery restaurants and services face

Amit Dua
26th Oct 2017
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In the world of online food delivery and e-restaurants, the challenges that face the food industry are no longer simple and require special efforts to stay ahead in the game.

With online food delivery and takeaway market forecasted to grow at a CAGR of 15.25 percent till 2021, and an increasing number of customers preferring to ‘order-in’ their food, it is not surprising that a number of restaurants and delivery services have jumped onto the bandwagon.

However, as the online food delivery channel grows popular, it also brings with it entry barriers for new players, and risk of cannibalisation for the existing players. Online food delivery model has its own dynamics and presents a different set of challenges as listed under:

Wavering customer loyalty

In the age of e-commerce, fidelity is quite common in customers. The more choices they get, more spoilt they get. For them, the mantra is ‘the more the merrier’. A restaurant or delivery service that provides better deals, incentives or freebies earns the loyalty of the moment. There is no sure-shot way to ensure that customers will stick around.

Unpredictable pricing model

Due to fierce competition in the online food delivery segment, it is very challenging to adopt a pricing model that is not subject to fluctuation and push sales continuously. As it is, the smaller players work on lower margins and capital, and reducing prices further may put them out of the business. As far as established restaurants and delivery services are concerned, there is no guarantee that price cuts will lead to higher sales as customers always expect ‘extra benefits’ while placing their orders.

Logistics dilemma

Should the delivery be restricted to only limited areas or spread across the city? What are the chances of getting a higher number of orders from a particular area? How many delivery vehicles would be required and how to allocate them across the delivery points? Would the food remain fresh and retain its quality if delivery is at a far-off location from the restaurant? Restaurants and delivery services need to consider all these and various other parameters while deciding the last-mile logistics model. Customers expect timely delivery, and inefficient logistics can only disappoint them and make them lose trust in the service.

Unreliable delivery and logistics staff

The various retail e-commerce services have fuelled the demand for delivery and logistics staff. However, the attrition is quite high as well for a number of reasons such as inadequate salaries, poaching and absconding, lack of training, absence of employee benefits and career progression opportunities, and health and life risks (weather all seasons, frequent changes in work schedules and carrying bulky bags). The delivery may take a bad hit if the delivery staff is short in number.

Inconsistency in food quality

It is a fact that food delivered in a box stands no comparison to the food served straight from the kitchen at the tables a few metres away in the restaurant. No matter what food quality and packaging measures for online orders are taken, they are prone to quality lapses. The pizzas will get cold, curries or sauces will spill, noodles will get sticky and sandwiches will get moist. The customers equate the quality of food directly to the quality of delivery.

Inability to cope with volume

Let’s say, a particular online food delivery service is getting quite popular. There is a spike in demand and orders just keep pouring in. But, does the restaurant have its operations and logistics in place to handle the volume without interrupting the service to walk-in customers? Most times, restaurants fail to develop a second or alternate line of operations to handle online deliveries.

Entry of bigwigs

Looking at the potential of online food delivery space, e-commerce giants have entered the market. For example, Uber and Amazon have launched UberEATS and Amazon Restaurants respectively. Not to mention, the old players such as Pizza Hut, Starbucks and McDonald’s are pepping up the competition too. They have financial and operations resources to meet the market demand and keep the competition at bay. So, smaller and independent food delivery setups struggle to retain their position in the market.

While the future of online food delivery space looks bright, players need to overcome these unique hindrances to survive the competition. A food mobile app turn the tables in your favour and enhance online food ordering experience for your customers.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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