In an era where convenience takes precedence overall, more and more customers are choosing to order food from restaurants that offer delivery. To keep up with customer expectations, restaurants are under pressure to provide a seamless delivery experience.
However, the cost associated with setting up in-house delivery is significant. On the other hand, third-party delivery services, which seem like the smart choice in this scenario, are extracting hefty commissions. Most restaurant owners are in a dilemma over the in-house versus third-party delivery debate. In this article, we discuss the pros and cons of both these options to help you choose better.
In-house delivery requires restaurants to hire a dedicated delivery staff and preferably their own fleet of vehicles to deliver food to customers.
a. Control over the Customer Experience
Setting up your own delivery services allows you to control the entire delivery experience, including the timeline or any additional benefits you may want to offer to your customers.
b. Customer Engagement:
By offering in-house delivery, you have a greater opportunity to engage directly with your customers and immediately resolve any issues that may crop up in the delivery process.
c. Customer Data:
If your customers are placing their orders directly through your website or app, you have access to all relevant data for these customers, which helps you to strategize and build on your future marketing plans.
d. Builds Brand loyalty:
When a customer uses your website or app to order, the customers are engaging directly with your brand. This helps you to build brand loyalty in the long run.
a. High Costs:
The costs required to set up and maintain your own delivery fleet can be quite high.
b. Logistical Concerns:
Offering a smooth in-house delivery experience requires a lot of effort in terms of people, time, and resources, and management of the delivery drivers.
If anything goes wrong with the delivery experience, such as a delay in delivery orders or food not reaching the customers in the right state- your brand is directly affected, there can be no blame-shifting in this case.
As an alternative, you could outsource the entire delivery service to another company. You can tie up with companies like GrubHub, Doordash, and Ubereats to take care of processing orders and delivering food to customers on behalf of your restaurant.
With 60 percent of U.S. consumers ordering delivery or takeout once a week, the third-party delivery market is expected to grow to a value of $24.5 billion by 2022.
Opting for third-party delivery services is definitely the more convenient way of delivering food to your customers as it outsources the entire gamut of logistical concerns related to processing orders and delivering food on time to another company.
b. New Customers
57 percent of millennials claim that they prefer food to be delivered by restaurants so they can stay home to watch movies and TV shows. If you are not offering delivery, you are missing out on these customers.
By tying up with the third-party delivery services you gain access to a much wider audience native to these apps. Many customers who may have previously shied away from ordering from your restaurant due to the nonavailability of delivery services would now be ready to order from you. In many cases, customers who get a taste of your food through these online orders may choose to visit your location at a later stage.
c. Cut Down on Costs
By opting for a third-party delivery service, you can save a significant amount of costs required for setting up and maintenance of the delivery fleet.
d. Increase in Sales
60 percent of restaurant owners claim that offering delivery services has generated incremental sales. Offering your menu on these platforms introduces your brand to a wider set of audience, thereby increasing the average number of online orders your restaurant receives.
e. Better Allocation of Resources
Once you have outsourced delivery, you have more time and resources on your hands to focus on the quality of food and services that you bring to the table.
f. Marketing and Advertising
Most third-party delivery companies provide advertising and marketing for restaurants on their app for an additional cost. You no longer have to worry about devising strategies to reach new customers, as these services take care of the same.
a. Loss of Control Over Customer Experience
By opting to outsource deliveries to a third-party, you lose control over several aspects of the customer experience. Factors such as traffic, an excessive number of orders, the state in which the food is delivered can affect your brand reputation.
Several restaurants have complained of untrained delivery staff hired by third-party delivery services. There have been several reported incidents of delivery drivers disrupting the normal functioning of the restaurants during pick-ups, or sour behavior with the customers.
b. Declining Revenues
In the long run, many restaurants claim that in spite of the increase in the number of online orders received per month, they are witnessing a decline in their profits due to the high margin charged by these services on every order placed through their app.
Your restaurant may not be equipped to handle the increased number of orders that you are likely to receive via these apps. To meet the demand and to ensure the smooth operation of your in-store services, you may have to handle additional staff. There are several such administrative costs that may arise in the long run, which impinge on your margins.
c. A Decline in Brand loyalty
When a customer orders from your restaurant via these apps, there is no direct engagement between these customers and your restaurant. So, effectively customers who are ordering from your restaurant via the app become customers of the app or the service. They owe their loyalty to the app instead of your restaurant. According to a survey, 43 percent of restaurant professionals said they believe third-party apps hamper the direct relationship between a restaurant and its customers.
d. Loss of Customer Data
Most third-party delivery services in the restaurant industry are not sharing customer data with the restaurants. Restaurants no longer have any means to reach these customers directly or build on their marketing strategies to retain these customers in the future.
e. Vulnerable to Competition
Once you make your restaurant available on these apps, your brand is competing with all the restaurants in the vicinity that offer similar food. So a customer will choose to order from you only if you are at the top of your game.
Further, your restaurant may not appear at the top of search results on third-party apps, in spite of having higher ratings, as ranking on these apps is also determined by the amount you are paying to these services.
Most of the third-party delivery services are big companies with huge marketing budgets. In order to promote their app, they are offering huge offers and discounts on orders placed through their app. Individual restaurants may not be able to compete with these offers, further discouraging customers to order directly from them. Many restaurant owners feel it’s similar to losing your customers to the app.
When faced with the question of whether to opt for a third-party delivery company or set up your own, you must consider all the above-mentioned factors before deciding what would work best for you. A detailed cost-benefit analysis with a long term perspective- will help you make a better decision.