- Since May 2019, monthly active users of the largest foodservice delivery companies have dropped by more than 13%, according to data from Apptopia. The company tracked the food delivery market from January 2015 to February 2020.
- Mobile app sessions with DoorDash, Caviar, Uber Eats, Grubhub, Seamless and Postmates have also dropped 17.7% since May 2019.
- The company attributes declining numbers to a few factors, namely usage drops due to new user promotions regressing.
The food delivery industry has no doubt been aggressive with its new user acquisition approach, partnering with chains to offer everything from free food to merchandise for those who download aggregate apps. But once those promotions dissipate, the likelihood for usage is likely to wane as well, particularly once customers are charged full delivery fees.
Those fees have been a major pain point for both customers who experience sticker shock with the markup and operators desperate to offer delivery as demand increases, but who aren't able to absorb all of the costs. The Seattle Times broke down some of that markup, reporting that delivery can add anywhere from 7% to 91% to the bill versus what customers can expect to pay at a restaurant.
It should come as no surprise that a 91% markup would be unsustainable, and undesirable, for most consumers. With the addition of Grubhub's subscription program, the top four delivery companies now offer subscription memberships to help keep those costs in check for heavy users. These subscriptions may be a good compromise, especially since it can help with diner retention, but they may also explain the drop off in downloads Apptopia cites.
These markups may also explain why more focus has been placed on carryout as of late. The channel offers nearly as much convenience, especially for more ubiquitous chains, without that added cost for consumers or eroded margins for operators. In fact, carryout makes up the bulk of the off-premise industry (93% according to the National Restaurant Association).
As such, some delivery companies have diversified their offerings to include a focus on carryout. Earlier this year, for example, Grubhub launched a technology suite called Ultimate that is focused specifically on takeout orders.
Apptopia notes that while delivery app usage has declined, that doesn't necessarily mean revenue has. However, profits remain elusive for foodservice delivery companies, which is a big deal if and when investors tire of subsidizing those customer acquisition promotions only to see usage drop.
Notably, and despite this slight decline, there is a base of consumers who will pay the costs of the convenience, and many restaurant brands are experiencing growth in the delivery channel, meaning delivery is here to stay. Perhaps the best way to gauge what's next, then, is to look at China, where the market is more mature. That market has started to consolidate and the big delivery companies like Ele.me and Meituan have started to scale back their promotions.
With the reduction of subsidies, those operators that rely heavily on delivery, like virtual kitchens, will have to close, take on the additional costs to maintain diner loyalty or shift the cost to consumers, TechCrunch reports. That could make the future of delivery a little less certain.