How digital and COVID has re-shaped the eating out and dining in market.
If we think back 10 to 15 years ago, restaurant-quality meal delivery was still largely limited to foods such as pizza and Chinese. Fast forward to today and food delivery has become a global market worth more than USD $220bn and is expected to expand at a compound annual growth rate (CAGR) of 10.3% from 2023 to 2030, according to Grand View Research.
User-friendly apps, coupled with lower cost delivery and an expansive range of options has unlocked ready-to-eat food delivery as a major category.
Down under, our passion for food and our insatiable appetite for convenience has fuelled astronomical growth in recent times. In 2022 it was estimated that delivery was driving approx 30% of total restaurant sales with over 5.5 million Australian consumers aged 14+ (26.5%) ordering food online (according to Nestle Professional). But where were we a decade ago? In 2013, 67,000 Australians ordered food online for delivery. By 2017, the number had doubled- but is still dwarfed by the size and scale of adoption we see today.
The rapid growth and scale gave rise to the 'ghost kitchen', with Uber Eats claiming in 2019 there were more than 1,000 virtual restaurants on its platform in Australia, some of which were run by existing QSR and Fast food providers like Noodle Box, who run a separate online only brand that serves the market. This approach allows food service businesses to access and reach different customers, bring in more revenue and optimise their investment in kitchen equipment.
But not only has online delivery created new opportunities for operators to better serve their end consumers, it has also fundamentally shifted how food service businesses prepare and serve their product. In a world where products need to be able to travel well, hold form and shape and retain heat, the shift to delivery has challenged operators to re-think what they serve and the ingredients and products they use to deliver the same experience as in-store.
Digital changing so much more than delivery
Whilst the online delivery market is booming and has in its own right become a major category, the convenience and transparency that apps and digital ordering solutions afford are also changing the on-premise experience for QSRs, restaurants, cafes and more.
According to an Australian study in 2021 by DoorDash- a good ordering experience is now one of the key factors that drives decision making (74% of Aussies said it is important) when determining whether to dine in, pick up or get delivery when ordering from a restaurant. It is trends like these that are challenging QSRs, hospitality venues, restaurants and others to re-think the way they deliver experience for customers who dine in and order online for pick up.
In the QSR space, it is anticipated by 2025 that 52% of quick-service sales will be driven by digital. A solid portion of this will be transactions undertaken by patrons dining in but utilising an app or other digital solution to aid their dining and ordering experience. Apps and other digital solutions enable consumers to spend more time immersing themselves in the menu to make informed choices and pay without the need to wait for service. In addition, they enable the operator to share more information with the consumer about the origin of the products and how they were sourced and prepared, which is vital given consumer demands for trackability and transparency when it comes to what they choose to consume. What's more, technology is enabling operators to streamline their operations and reduce operating costs.
Digital aiding the dine in or eat in experience is, however, just the tip of the iceberg. Digital is creating much bigger shifts in the premise experience for cafes, QSRs and others. As mobile ordering takes hold, brands like Starbucks are re-imagining the service experience. Starbucks, the largest restaurant company in the world by revenue in September 2022 shared its “reinvention” plan, which includes, among other considerations, a focus on the digital experience and opening more mobile-order-focused stores.
The plan cited “tremendous opportunity to further diversify and expand formats” for its stores in light of the changes in how consumers order, including more “pick up, delivery-only and drive-thru only locations,” with the brand specifically highlighting the Mobile Order & Pay channel as one that appeals to customers’ new digital expectations.
No longer an option to operate as we did
With demonstrable shifts in the way consumers engage with the restaurant, hospitality and café sector, digital should not be considered a bolt-on to a brand's operation - and that is true whether you are an independent operator or one of the largest chains in the world. Over a short period of time, consumer behaviour has shifted demonstrably and that requires brands and businesses to;
Ensure they are discoverable in the places and spaces where consumers are looking to make choices about where to eat. This includes consideration to their need to be present and available within third party delivery platforms, alongside of having their own presence to engage the diner.
Ensure customers are given choice – in the way they can order, and if they want to pick up, have it delivered or order digitally whilst on premise. This also extends to providing flexibility in the ordering process to easily add or remove items, providing a seamless ordering process.
Consider, for those with a dine-in experience, the role that digital plays to enhance the on-premise experience - allowing consumers to choose to order digitally or directly engage with customer service staff, and ensure that those work together to deliver a great overall dining experience.
Consider how the shifts in market have fundamentally changed the revenue and profit mix. With more consumers ordering and utilising grab and go, businesses like Starbucks are re-thinking their footprint and store formats to cater for the different needs of consumers and maximise profitability from their stores and their customer base.
Arktic Fox partners with an array of brands in the retail, food service and FMCG space. If you are looking to define or validate your future digital & eCommerce strategy in the face of change - then find out how we can help here.