Context
During the COVID lockdowns and pandemic restrictions, food delivery services became a vital support system for the restaurant industry. As restaurants downsized capacity or completely shut down their dine-in options, the sector experienced remarkable growth, and numerous e-commerce marketplaces emerged. Online ordering has now become an integral component of the “new normal.”
For restaurants, keeping up with the demand for delivery means choosing the right model. One option is to use online food delivery marketplaces, which provide customers with the ability to choose and order from a diverse range of restaurants. Alternatively, businesses can choose to manage their own direct e-commerce channels. This article outlines the advantages and drawbacks of using a food delivery marketplace compared to creating your own e-commerce platform. But do you have to choose, actually?
The advantages of food delivery marketplaces
Online marketplaces are third-party platforms that partner with restaurants and offered a quick and easy way to make their products available to a larger audience of potential customers. Let’s start with the benefits they provide.
Quick and easy to setup
With the existing e-commerce and delivery infrastructure, restaurant owners need just to register and upload their menus. For the customers, the process is as straightforward as browsing, selecting, and placing an order. Food delivery marketplaces demand minimal effort and investment from restaurateurs to start delivery operations.
High volumes of customer traffic
Online marketplaces have a high volume of customer traffic that can find you because they are already coming to the site. Marketplaces have marketing budgets and are advertising on Google — which means there should be constant traffic hitting your store pages.
Focus on business
Marketplaces allow you to outsource delivery logistics, removing the headache of coordinating and executing deliveries. This gives you more time and energy to focus on making the food you love and running your business. Outsourcing deliveries also means you’re saving on manpower. There’s no need to put a hiring process in place to hire extra staff. When you don’t have to manage a fleet of drivers, you can focus on training and up-skilling your current restaurant staff.
The challenges restaurants face with marketplaces
As we see, marketplaces bring great value, however, there are also some important issues that may have both a short- and long-term impact on your business. And you should be aware of them.
Commission fees
Food delivery platforms charge between 20–30% in commission fees — I know that from the statistics and because I co-own one. In case the restaurant’s margin is not high enough, this means reduced or even negative profits. Definitely, you can raise prices for your menu items on marketplaces, but this price discrepancy may cause reputation issues and badly influence the competition.
So while switching focus to delivery during the pandemic was a way for many restaurants to stay alive, it may not be a sustainable long-term model if you’re working with marketplaces only.
Dely — automated e-commerce and delivery solutions for restaurants with almost no comission.
No control over the customers
Actually, the customers are not your customers — they are the customers of the marketplace. Thus you sacrifice control over your customer data and remarketing. This data belongs to third-party platforms, yet your business needs it to gain customer insights. With access to data, you can discover vital information, such as the average demographics of your customers, where most of them live, or what their favorite menu items are.
In addition, when a customer buys from an online marketplace, the marketplace earns their loyalty, not you and your brand. So at the end of the day, the cost of using online marketplaces is your relationship with your customers.
You are one of many
On a third-party food delivery platform, your restaurant will receive more visibility, but you can end up a small (and not that desired) fish in a large pond. Although customers have the option to search for various cuisines or specific businesses, standing out from competitors may be challenging. Moreover, there is minimal transparency regarding the criteria for how the marketplaces rank the restaurants within the app or the reasons why certain businesses are featured while others are lost among numerous competitors. Also, be aware of the price wars.
Ironically, the same platform meant to be your partner can sometimes hinder your success in online delivery and drive customers away. Food delivery marketplaces have increasingly invested in “dark kitchens,” dedicated spaces for preparing delivery-only meals located on the city outskirts where rent is cheaper. This development not only introduces new competitors with lower operating costs but also pushes the competitive environment beyond its previous limits.
Possible brand issues
If a marketplace offers a poor delivery experience, your brand suffers. Research shows that 84% of customers will not buy from a business after a single bad delivery experience. That delivery experience is an extension of your brand as well as the marketplace’s brand. You need to ensure you’re delighting your customers with every brand interaction including delivery, service and product quality.
Last, but not least. Be aware of the risk of getting suspended or banned from the platform, e.g. when customers are unhappy and/or their concerns are not responded to on time. So definitely you need a plan B.
The advantages of your own solution
Building your own direct-to-consumer (D2C) e-commerce channel is an alternate or additional model for food delivery. It means owning the ordering experience of your customers from start to finish, getting increased profits and having more control. This a smart move for long-term sustainability.
Increased profit
Using your own e-commerce platform results in significantly lower commissions (or no commissions at all if you buy the solution instead of renting it) for each order, allowing you to maintain healthier profit margins. Also, you’re either paying for an in-house delivery driver or working with a delivery partner and paying a fixed fee for the service. This commission fee model is not only fairer, but it’s also particularly advantageous for your biggest orders.
Your brand
Selling through your own delivery channel means you control how your app or website looks and feels. You can use your brand colors, logo, font, and even your tone of voice. With that kind of hands-on control, you can easily update menus and photos and correct any issues in real-time. This helps you stand out from the competition and build a direct relationship with your customers.
Direct marketing
A proprietary food delivery channel means you own and control your customer data. Through analyzing this data, you can tailor marketing offers to individual customers. You can offer specials, deals, or rewards based on past orders and help your customers feel cared for. These personalized experiences lead to enhanced brand loyalty and more business.
Dely.io allows you to create and manage customized promotions, discounts, and loyalty programs.
A hybrid solution to maximize sales and profit
And here the good news is coming — food delivery options don’t have to be an either-or choice. In fact, a hybrid or blended model can bring you the best of both worlds:
- Leverage existing food delivery marketplaces to generate orders and quickly grow your reach.
- Add and perfect a branded direct-to-consumer (D2C) delivery channel so you can harness direct orders at a lower cost to you while building brand loyalty.
By diversifying your approach, your business can grow sustainably. With this hybrid food delivery model, you capture a variety of customers and maximize your profits in the long run. Also, this means you always have a plan B.
Getting started
Let’s move on to practical steps. If you’re considering setting up your own delivery channel, all it takes is several simple steps.
Find the right partner
First things first, choose your partner carefully. Today these e-commerce partners offer more than just a storefront; they come with all the trimmings too — robust reporting, social media integrations, SEO tools, and even ad integrations. A platform like Dely can help power all your food deliveries directly from your website. This allows you to focus on what you do best while leaving your delivery needs in the hands of a fast and reliable fleet of couriers. Set yourself up for success.
Encourage customers to order directly from your own channel
The good news is that 44% of customers prefer ordering directly from a restaurant’s website or mobile app, according to a survey conducted by digital ordering solution Tillster. All you have to do is make it easy (and pleasant) for them to do so. First, make sure your e-commerce channel looks and feels like your brand. Make it easy to use, and keep improving the customer ordering and delivery experience. Tweak the options and settings until the experience is as smooth as possible.
Do marketing and re-marketing. Keep customers truly yours
Consider various marketing and advertising opportunities, from print or digital ads to social media campaigns. Don’t forget traditional marketing strategies, either. Flyers and leaflets distributed in your area can go a long way. And then there’s the oldest trick in the book: satisfied customers lead to free advertising in the form of good, old-fashioned word of mouth. Also, setup re-marketing campaigns to keep your clients loyal to your solution.
As a conclusion
So in the end that leaves us with three different options:
- Order custom development, which would allow you to tailor the solution precisely to your specific needs. However, this option can be time-consuming and expensive.
- Use free online tools, which can be a more cost-effective solution. However, the tools may not be able to provide all the features and customization options you need for your project.
- And finally, you could use Dely.io solutions, which would allow you to have a comprehensive solution that is customizable and scalable to fit your needs.