Imagine: you’re having a “can’t-leave-your-desk” day at work, when you realize the leftovers you brought from last night’s dinner suddenly sound stale compared to something fresh from that new restaurant everyone’s raving about. Thanks to third-party delivery vendors, there’s an app for that (actually, there’s quite a few!). While this convenience is great for you as a consumer, it can present hurdles for you as a business owner—especially if your location is already slammed at lunch and not fully equipped to handle delivery orders.
This is the bind many restaurants now find themselves in—balancing an incremental revenue stream with the operational challenges it presents. At this year’s SMG Forum in Las Vegas, I had the pleasure of joining Postmates Sr. Vice President of Merchants Dan Mosher on stage to present research on what’s driving the third-party delivery market, how brands can tap in, and which pitfalls to consider. Here’s a high-level recap:
Convenience drives the market + the market’s poised for growth
From microwavable meals to drive-thru, convenience has always played a key role in deciding what’s for dinner. But today’s customers have less time than ever, are more tech-savvy, and don’t mind paying a premium for something that makes their lives easier…all reasons why a service designed to deliver impulse cravings right to a customer’s doorstep is taking off. But how quickly is this market growing?
We used our patented consumer mobile research app SurveyMini® to trigger a custom survey to more than 60,000 respondents across 30 of the largest DMAs in the U.S. The data revealed 25% of respondents had used third-party delivery in the past 3 months, more than double the 12% usage rate reported in a 2016 study—and the top 4 motivators all relate to convenience.
While these numbers show adoption is quickly accelerating, there is still ample room for growth. During our presentation, Dan shared that consumers spend $2.6 trillion locally every year, but just 3.4% of that happens online. Combined with the fact that third-party delivery is just starting to break into non-restaurant segments like grocery and traditional retail, and you can see just how much potential lies in this space.
There’s much to gain for brands that differentiate
It’s not just how many people use third-party delivery that matters—it’s also who’s using it and how. Our data shows these customers skew younger and more diverse—and 67% are repeat customers. In a world where millennials are blamed for killing everything from casual dining concepts to napkins, third-party delivery presents an enormous opportunity to connect with these coveted, hard-to-reach consumers.
During our presentation, Dan stated that the most effective way to make those connections is through third-party delivery vendor partnerships—citing the fact that merchants see a 3–4X increase in sales through the app after they partner with Postmates. In addition to attracting new customers through exclusive promotions, brands can minimize problem occurrence and sync up operations by interfacing directly with the platforms. And that brings us to the last point brands need to consider.
It’s not just your food out for delivery—it’s your reputation
Issues that occur outside your physical location are notoriously hazardous. Left unresolved, customers may give your competitors their next order before giving you a second chance—and you might never even know! What makes the rapid rise of third-party delivery so disconcerting for many brands is this lack of control and oversight. And rightly so. Our report revealed 35% of respondents who used third-party delivery services experienced an issue—more than 3X the industry average for traditional orders.
Even worse: nearly half of respondents blamed the restaurant, and 18% indicated they weren’t sure who was at fault. Since third-party delivery vendors are largely absent from the polarized world of social ratings and reviews, upset customers turn to your online sites when there is a problem. In fact, restaurant reviews mentioning third-party delivery providers average just 1.4 stars—despite average ratings of more than 4 stars for those same brands when traditional order methods are utilized.
With so much on the line, brands need to strategize how best to:
Late adopters, beware: Third-party delivery isn’t going anywhere
It’s clear that due to changing consumer demands, this phenomenon is neither a fad nor some distant-horizon consideration. Instead, this new reality poses an immediate business challenge. Whether you choose to partner with a third-party delivery vendor or not, your brand can and will show up on their apps. This means you need to act quickly to build an operational strategy that optimizes performance, mitigates problems, and delivers experiences that keep your customers coming back.
To grab a copy of SMG’s full report, be sure to connect with us at RLC. In the meantime, if you have any questions or if you’d like to discuss your brand’s strategy for measuring third-party delivery experiences, reach out to us here.
Michele Vance | Chief Sales Officer