ALEXANDRIA, Virginia—food delivery apps are facing slow growth, high inflation for decades and a potential economic downturn, reports the Wall Street Journal.
Apps, such as DoorDash, Uber Eats and Grubhub, have been widely used by consumers during the pandemic, when restaurants were closed to inside customers. But now that the pandemic has subsided and rising prices are weighing on the American consumer, food delivery apps are offering new ads and offers to entice customers, updating their apps to encourage more spending and offer more than food to keep and attract new customers.
Over 80% of the US food delivery market is handled by DoorDash and Uber. Both apps increased delivery revenue in the first quarter and are expected to grow throughout the year. However, the growth rate of both apps has slowed significantly.
Total orders for all food delivery apps grew 11% year-over-year from April to June 2022, representing the slowest quarterly expansion since the start of the pandemic. Over the same three-month period, orders were up 48%, but they were up 88% over the same period in 2020. Delivery spending also grew at its slowest quarterly pace in two years in the three months ending in June.
Grubhub, once the market leader in food delivery apps, expects negative profit-after-expense margins this year. Grubhub’s parent company, Just Eat Takeaway, said orders were down in the first quarter ended March from a year earlier. Just Eat is considering a full or partial sale of the app just one year after its acquisition.
However, DoorDash and Uber Eats say consumers’ habit of ordering food at the touch of a button is here to stay, and the companies say the habit continues to grow and inflation hasn’t had an impact. significant impact on consumer demand during the first quarter, which ended in March. When DoorDash released its first-quarter results, the company said it expected the total value of orders placed on its app to increase by about 20% this year, which would exceed the company’s record spending. last year.
“Our strategy and operational efficiencies have enabled DoorDash to outperform in all market environments,” the company said.
Second-quarter results are expected to be announced by the two companies next month.
Luxury or necessity
The question is whether consumers will view food delivery as a luxury or a necessity if an economic downtown occurs.
“There’s more economic pain for consumers,” Matthew Goodman, principal analyst at data analytics firm M Science, told the Journal. “You have to wonder if more price-sensitive consumers will be willing to pay for this convenience as often as they have been.”
Uber and DoorDash are focusing more on delivering groceries and alcohol to boost revenue, and the Journal reports that these items help contain labor costs because more orders can be combined. DoorDash has partnered with Albertsons for 30-minute delivery, a segment of the grocery delivery business dominated by Instacart. Uber says it has added 24,000 grocery stores to Uber Eats globally, including Albertsons, Carrefour, Costco and Woolworths, and the company announced yesterday that it was rolling out new features to make in-app shopping “more convenient , intuitive and reliable than ever”. .”
Food delivery apps also offer deals to gain new subscribers. Uber Eats subscribers can now enjoy a 10% discount on every Eats order, twice as much as before. Grubhub has partnered with Amazon to give Prime members free Grubhub+ for one year and offered free lunch to New Yorkers. DoorDash has an agreement with Chase that allows cardholders a free year of DashPass. DoorDash has also launched a student plan that costs half the price of a regular subscription.
Additionally, Uber and DoorDash now offer food shipping from popular restaurants across the United States on orders such as Nashville Hot Chicken, Gourmet Ice Cream and Asian Meatballs.
Lloyd Walmsley, a UBS analyst covering the sector, told the Journal that although the food delivery sector was stronger than expected last year, that trend could be broken by the state of the economy. .
“There is certainly a growing concern that this is a very difficult place,” he said. “There are plenty of reasons to be concerned.”
According to the NACS “Last Mile Fulfillment in Retail Convenience” report, 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, limited access to consumer data, difficulties providing age-restricted products and services, and operational issues.
Here’s what convenience stores do for make delivery work for their businesses.