Month: October 2019

Impact of Food Delivery Apps on Eating Habits

Couple cooking in their kitchen

This is the third part of my series on the impact of Food Delivery Apps on the culture of dining. In the first part, I explored the different segments of the ‘Eating Out‘ population while in the second I looked at which of these segments might switch over to food delivery and ‘eating in’.

In this post, I wish to explore some of the changes / consequences if the culture of ‘ordering in’ becomes prevalent.

As I mentioned in my previous post, there are segments (and instances) when people are anyway in the mindset of eating out. For such use cases, food delivery apps are a substitute for eating at a restaurant. One can argue that, in such cases, there are no real winners and losers as it’s a matter of substitution. I haven’t looked at the economics, but I would assume that restaurants wouldn’t care too much if they are serving the customer within their premises or outside. There are other issues that restaurants might have with this arrangement, but we will come to that later.

I also mentioned in the same post that the ecosystem of Food Delivery Apps is leading to the rise of the ‘Occasional Indulgers’ segment. These are users who would ordinarily not have considered eating out, but do so occasionally due to the convenience (and discounts) now being provided by such businesses. This is clearly incremental sales to the restaurant and / or food delivery app.

Another ‘incremental revenue stream’ comes from all the rest of the segments who would indulge in ‘dining in’ occasionally.

So what are my concerns with this model?

I will start with the health and sustainability angles. I guess no one will argue that cooking and eating in is significantly healthier than eating out. My concern is that if the culture of ‘ordering in’ becomes ubiquitous, then people would stop cooking and eating healthy. From my personal experience, I first learnt to cook while living with friends in the early phase of my professional career. But I only really cooking regularly after marriage and discovered that I quite like it. It would be a shame if less and less people discover the joys of cooking and rely on food deliveries most of the times.

The second issue is with sustainability. Again, there can be no dispute that ordering in is leading to a significant increase in the use of plastics, including single-use plastic.

The third concern is the potential impact on restaurants, especially now that more of the food delivery companies are building their own ‘cloud kitchens’. If more and more consumers are indifferent to which restaurant they are ordering their food from, then it’s a fair possibility that businesses of restaurants would be impacted, leading to potential closures as well. Which would be a shame for other restaurant goers, for whom eating out is as much about the whole experience as it is about the food.

This phenomenon is still fairly recent. It will be very interesting to see how eating habits are changing due to this industry. Only time will tell!

Eating Out in the time of Food Delivery Apps

Man delivering food on a bicycle

Food Delivery Apps have gained significantly in popularity over the last few years. On the back of significant investments by Venture Capitalists, many of these companies are burning large sums of money in acquiring customers.

So who are the users most likely to be using Food Delivery Apps?

In my previous post, I mentioned that there are possibly 9 types of people who ‘eat out‘. Let’s look at each of these and understand if their motivations for eating out lend to them being regular users of Food Delivery Apps.

  1. Necessity – These are people who have no other choice than to eat out. This group includes students, working professionals, traders and others who simply do not know how to cook, or don’t have the wherewithal to do so. This set of eaters would typically go for the most convenient and reasonable priced option. I would argue that these would constitute the prime segment for home delivery of food.
  2. Eating out while at work – Similar to the first segment above, but would also include professionals who prefer to eat out while at work, rather than carry food from home. This is another segment that might switch to Food Delivery Apps for their office lunches, at least occasionally.
  3. Socialising with business teams – Eating out is a very widely accepted form of social gathering. Many working professionals would eat out as part of team outings, business meetings, etc. This segment would, typically, prefer fine-dining restaurants. Highly unlikely to switch to ordering on Apps, unless it’s for a working lunch.
  4. Traveling on work – Slightly different from the first segment in that these users would typically be on expense accounts. They might not always spend on fine-dining restaurants, but would not mind spending a bit more for good food with a nice atmosphere. They might also be open to trying different cuisines. My guess is that only a small percentage of such users would order on Apps. Factors influencing the decision would include if they already have the app installed, have facilities to eat comfortable at their place of stay, if there are no easily accessible restaurants nearby, etc.
  5. Hanging out with friends – Eating out is a good way to connect with people. Friends can typically be expected to catch up at good quality restaurants, not necessarily fine dining, where they can enjoy a leisurely meal. Many groups in this segment might prefer hanging out at pubs, bars, cafes, but might still end up at a restaurant for a proper meal. There would be certain sub-segments in this group that would prefer the convenience of ordering and eating in while meeting up with friends.
  6. Eating out with family – Very similar to the above segment, but likely to involve kids. So the preference would be for family-friendly restaurants. Highly unlikely to be replaced by ordering in as a large part of the fun (at least for the kids) is in the experience of visiting a restaurant.
  7. Special occasions – As the name suggests, these would usually end up in fine-dining restaurants or rare / different cuisines. Quite possibly the least likely of all the segments to order in.
  8. A treat for the kids – Specific to families with young kids, this would involve a visit to a fast-food restaurant with kid-special meals as well as ice-cream parlours. Another segment where a significant sub-segment might prefer the convenience of eating in, especially if it’s an impulse decision.
  9. Gourmands – People who live to eat. Highly likely to frequent new openings, unique cuisines, etc. I would guess that
  10. Occasional Indulgers – This is a new segment that, I believe, is expanding due to the prevalence and convenience of ordering via Food Delivery Apps. These are users who would not have ventured out into a restaurant for eating (preferring to eat in) but end up ordering in occasionally either for a change, felt lazy to cook, had no food at home, etc.

So here’s my ordered list of the above segments based on the percentage of users within each that I believe would switch to a Food Delivery App (in descending order):

  1. Necessity – have no choice, and find the options available on a App superior to their usual haunts
  2. Eating out while at work – saves time, if not money, alleviates boredom from having to eat from a limited set of options.
  3. Occasional Indulgers – this is the big question mark. How much adoption can Food Delivery Apps make in this segment might play a deciding role in securing the long term viability of the business.
  4. Treat for the kids
  5. Hanging out with friends / family
  6. Gourmands
  7. Traveling on work
  8. Eating out with family
  9. Socialising with business teams
  10. Special Occasions

What are your thoughts? Do you agree with the above ordering? Please let me know!

 

Why do people eat out?

Eating out

This is the first part of my exploration of the impact of the rise of Food Delivery Apps. In this part, I will list down my views on the various reasons why people eat out.

Nowadays, the concept of ‘eating out’ is almost synonymous with restaurants. But the history of eating out goes far beyond that of restaurants. In ancient times, traders (and farmers) would need to eat while they were traveling or visiting the markets. Inns, caravenserais, bodegas, etc. were the places that these merchants visited to satiate their hunger and maybe enjoy some social company.

The history of modern restaurants is usually said to have started in France in the 18th Century, following the French Revolution and the fall of aristocracy and royalty which led to many chefs being unemployed. Many of these chefs opened their own restaurants, many of which would now be categorised as fine-dining restaurants.

The next big change in the restaurant business happened in the middle of the 20th Century with the rise of ‘fast food’ and ‘chain’ restaurants which made eating out affordable to the rising middle classes.

So why do we eat out? 

Here are my reasons:

  1. Necessity – As I mentioned earlier, the first people who ate out were merchants, traders and farmers traveling to market towns. These people had no other choice, being far away from home. Over time, this group has expanded to include students, working professionals and others who simply do not know how to cook, or don’t have the wherewithal to do so. This set of eaters would typically go for the most convenient and reasonable priced option.
  2. Eating out while at work – Similar to the first segment above, but would also include professionals who prefer to eat out while at work, rather than carry food from home. This segment would typically prefer easily accessible food joints with quick service (including take-aways).
  3. Socialising with business teams – Eating out is a very widely accepted form of social gathering. Many working professionals would eat out as part of team outings, business meetings, etc. This segment would, typically, prefer fine-dining restaurants.
  4. Traveling on work – Slightly different from the first segment in that these users would typically be on expense accounts. They might not always spend on fine-dining restaurants, but would not mind spending a bit more for good food with a nice atmosphere. They might also be open to trying different cuisines.
  5. Hanging out with friends – Eating out is a good way to connect with people. Friends can typically be expected to catch up at good quality restaurants, not necessarily fine dining, where they can enjoy a leisurely meal. Many groups in this segment might prefer hanging out at pubs, bars, cafes, but might still end up at a restaurant for a proper meal.
  6. Eating out with family – Very similar to the above segment, but likely to involve kids. So the preference would be for family-friendly restaurants.
  7. Special occasions – As the name suggests, these would usually end up in fine-dining restaurants or rare / different cuisines.
  8. A treat for the kids – Specific to families with young kids, this would involve a visit to a fast-food restaurant with kid-special meals as well as ice-cream parlours.
  9. Gourmands – People who live to eat. Highly likely to frequent new openings, unique cuisines, etc.

I think that covers most cases. Please let me know if I have missed any!

 

 

On the rise of Food Delivery Apps

There has been a fair bit of discussion lately on the impact of Food Delivery Apps on the restaurant business. This is a topic that I have been spending some time thinking about. It’s a complex topic, so I intend to break it into a few articles.

In Part 1, I want to explore the concept of ‘eating out‘. Why, when and who eat out?

In Part 2, I want to explore how this concept of eating out is changing with the prevalence of Food Delivery Apps

And Part 3 will be my thoughts on what does the rise of the Food Delivery App business mean for the concept of eating (not just ‘out’)

 

The Customer of the Future (or We All Live in A Shared Economy)

abstract aluminum architectural architecture

Continuing my reading on the rapidly changing customer purchase behaviours, I came across a few interesting articles over the past few days:

  1. The changing work and living spaces of millennials, Gen Z by Henry Skupniewicz
  2. The Future Of Stuff Is Shared Or Rented by Blake Morgan
  3. Customer of the Future Report published by Lippincott

Here are a few of my takeaways from these articles:

Changing work and living spaces:

  • People are not buying stuff that won’t fit into their lives logistically.
  • They are buying or even renting a single chair, instead of an entire set of furniture.
  • The consumption is more use-based rather than want-based.

 

Future of Stuff is Shared:

  • Modern customers crave freedom instead of being weighed down by possessions
  • The future of stuff is shared or rented

 

Customer of the Future:

  • Our lives will become increasingly de-located
  • Flexible models of work will be the norm
  • Ownership will yield to experience

 

Hopefully, the alternate title to this post would have become clear by now. There seems to be a distinct shift from ownership of assets to gaining experiences. This is being facilitated by technology, with many innovative companies offering services that are disrupting the traditional modes of consumption and tapping into this desire.

What does it mean for businesses? 

> Start paying close attention to this trend, in whichever industry you might be and wherever you might be located. I do not think this is a trend restricted to specific geographies or industries. You never know when you are likely to get disrupted!

> Keep asking the fundamental question of ‘What need of the customer am I trying to fulfill?’. And be open to the idea that the fulfillment of the need might not result in a sale of a product.

> What services can I (or would need to) offer that enables people to lead enriching, asset-light lives?

> What aspect of technology would I need to increasingly adopt to stay relevant?

These are times of fascinating and almost unprecedented change. Curiosity and adaptability are going to be key factors that can enable all of us as individuals and organisations adjust and embrace these changes.