What Makes Food Delivery Apps The Perfect Unicorn Material?
As of June 2019, the online food delivery industry has earned over $107.4 billion in revenue. Experts predict steady growth rates over the next few years and a large number of startups in this sector are attaining “Unicorn” status. So, the question is, what is fueling this trend?
Food is one of few cultural artifacts that boast of rich history but is inconsequential due to its ubiquitousness. Beginning as a mere necessity, it has evolved into a multifaceted element. Today, it has widespread ramifications that range from religion to politics and even business. In a digital age, food is a commodity that is at the heart of the multi-billion dollar industry.
With the practice of preparing one’s food on the decline, food delivery applications are ruling the roost. According to Statista, the first six months of 2019 saw close to 971.6 million users order food online. This brought in a revenue of over $107.4 billion. Experts predict that this sector will grow at a steady CAGR of 9.9% over the next five years. Additionally, the market will ultimately reach a net volume of $156.8 billion by 2023.
Moreover, the number of food and beverages startups unlocking the “Unicorn” status is on the rise. Today, companies like DoorDash, Postmates, and Swiggy boast of a billion-plus valuation. They also serve as an inspiration to other budding startups. Yet, what are the underlying factors that are pushing the growth of this sector? Let’s find out.
Fundamental Nature Of Food
In his 1943 thesis, “A Theory of Human Motivation,” Abraham Maslow identified components critical to human beings’ development. He drew a hierarchy of needs, where physiological elements like food, water, etc., garnered greater prominence because they sustain life.
Thus, from an economic perspective, one can understand that food is a commodity with intrinsic value and evergreen demand. This is music to any entrepreneur’s ears, and the significant market growth rates serve as concrete testimonies.
Better Internet Penetration
The Internet is one modern invention that has had a significant influence on how we conduct our everyday lives. Besides changing how we access information and entertainment, it has also significantly changed the way businesses function. According to Hosting Facts, over 4.1 billion individuals use internet, which equates to 53% of the world’s population. Moreover, this number is expanding at a phenomenal pace and is simultaneously changing how we function.
Today, brick-and-mortar establishments are being replaced by elaborate script-and-code organizations. One can source almost anything and everything online with food being no exception.
Increase In Smartphone Usage
When Steve Jobs described smartphones as “revolutionary products” in his 2007 speech introducing the iPhone, he wasn’t wrong. This touchscreen device, coupled with the Internet boom and rampant app development, has reimagined the fabric of our societies. In fact, smartphones have played a significant role in making the Internet accessible and mobile. Today, smartphones allow access to almost anything, right from the news to ordering goods.
According to Upwork, since 2014, the use of food delivery applications has grown by 70%. Similarly, eMarketer reports that close to 38 million smartphone users in the USA order food on a regular basis.
Shift In Lifestyle Patterns
Between physiological needs and sweeping technological changes, society too has played a role in popularizing food delivery apps. With traditional gender roles transforming and established work patterns undergoing transition, it has had a significant effect on food. A Nielsen report states that money spent on outside food as opposed to home-cooked food has increased by 94% since the 2000s. Likewise, factors like longer work-hours, increase in double-income families, and occupational migration have catalyzed the decline of home-cooked food.
Moreover, age also plays a role in determining the use of food delivery apps. A study by Technopak and FICCI found that 60% of Millennials order food more than once a month. In contrast, individuals belonging to the age groups of Gen X and the Baby Boomers spend significantly less.
By allowing individuals to order piping hot dishes with a few taps, on-demand food delivery is now an important cog in a world built around convenience. However, this market is far away from a saturation point. Even today, many regions are not under the ambit of aggregators or they lack proper infrastructure. This encourages budding entrepreneurs to invest in food delivery app development and launch platforms to cater to the demand. With the market not showing any signs of sluggishness and strong underlying factors associated with it, this industry holds a lot of promise.