The Technology Powering Food Delivery‘s Explosive Growth

The meteoric rise of the food delivery industry owes much of its success to the power of technology. Specifically, the confluence of smartphone penetration, GPS mapping, and predictive data analytics have enabled companies like DoorDash and Uber Eats to connect customers with their favorite meals more conveniently than ever.

While still early in the growth curve, food delivery seems poised for continued expansion as tech unlocks greater efficiencies across the customer journey. However, challenges remain around thin margins that emerging innovations seek to overcome.

Here’s a comprehensive overview of the technologies and data trends defining the modern food delivery landscape.

Market Size Powered by Mobile Tech Adoption

Industry revenue figures paint a picture of massive expansion in recent years:

• The global delivery industry hit $165 billion in revenue for 2023, up an astounding 205% from just $54 billion five years ago in 2018 (Zippia)
• North America accounts for $27.7 billion currently, with projections to grow at an 11% CAGR rate through 2030 (Business of Apps)
• 70% of Americans order takeout/delivery at least once per week – 20% order 2+ times per week (McKinsey)

Driving this exponential hockey stick growth curve is widespread smartphone adoption and the launch of convenient ordering apps.

As mobile ordering apps like DoorDash, GrubHub, and Uber Eats have scaled, restaurants have rushed to join their marketplaces to tap into surging consumer demand.

Fig 1. Food delivery app user growth 2016-2022. Source Statista

This network effect of supply driving more demand (and vice versa) has formed a positive feedback loop resulting in massive expansion of the total addressable market in just a few short years.

Consulting firm McKinsey sees strong momentum continuing in their latest industry report:

“The market has gained remarkable scale over the past five years, growing by more than 15 percent annually. There are no indicators that growth will slow significantly in the next five years.”

Bolstering confidence in future growth is the large untapped population worldwide still coming online every day thanks to increasing mobile penetration. Companies like DoorDash and Delivery Hero are just starting to expand globally into completely fresh markets.

While smartphone convenience lit the initial spark, lasting shifts in consumer behavior suggest food delivery is much more than a passing trend.

How Top Providers Leverage Data and Analytics

In the early 2010’s, ordering food delivery meant searching through your junk drawer for the nearest pizza place’s menu or dialing up one of a few Chinese restaurants offering delivery. Flash forward to today, and you can securely order just about any cuisine imaginable within seconds thanks to a handful of delivery giants.

The smartphone app experience offered by the likes of DoorDash and Uber Eats packages convenience, variety, and transparency into a slick interface powered by mountains of data. GPS tracking provides eerily-accurate delivery ETA’s while machine learning algorithms surface restaurant recommendations uniquely tailored to your tastes.

It’s this tech-forward experience that has helped DoorDash in particular cement itself as the delivery leader in the US:

• DoorDash commands 50% market share in the US after reaching as high as 72% during pandemic lockdowns (Business of Apps)
• Their delivery marketplace connects over 510K restaurant partners across 7,000 cities globally
• DoorDash facilitates a delivery every 4 seconds
• They reached a record high 105 million monthly average users in Q4 2022, despite broader economic slowdowns

Fueling this rapid expansion is DoorDash’s heavy investments into its data and analytics capabilities to drive core marketplace efficiencies. Key examples include:

Predictive Order Dispatch – Machine learning algorithms analyze historical demand patterns around factors like weather and city events to intelligently pre-position Dashers (delivery drivers) in anticipation of spikes before they happen. This cuts down delivery times and improves food quality.

CRM Analytics – Tracking conversion rates, customer lifetime value (LTV), churn and other key metrics provides restaurant owners unique insights to optimize their menus and operations. DoorDash offers self-serve performance dashboards to empower restaurateurs.

Order Grouping Algorithms – DoorDash developed automated optimization algorithms that batchorders going to similar locations. This allows Dashers to efficiently serve multiple customers in one trip, reducing delivery costs.

These optimizations (among many others) have powered DoorDash’s rise to the top spot through superior customer experience and order volume growth.

Meanwhile competitors like Uber Eats leverage strengths from their ride-sharing side to stay competitive:

• Real-time mapping data gives Uber better positional awareness of active drivers nearby who can dynamically switch to delivery orders
• Loyalty integration between rides and delivery provides customers discounts and incentives

And grocery delivery apps like Instacart tap into an entirely different data paradigm to enable frictionless shopping:

• Store inventory integration powers real-time visibility into product catalogues and availability
• Predictive basket algorithms provides suggested items based on purchase history and context
• Shopper CRM data assigns orders to best-match shoppers based on item preferences and store familiarity

As the industry continues maturing, expect leveraging data and analytics to drive optimizations to remain a key competitive advantage for leading operators.

Who‘s Ordering Delivery – And How Often?

Today you’ll find Americans of all ages and demographics embracing food delivery for its convenience and experience:

Table 1. Demographic breakdown of US food delivery customersegments. Source: Statista

While adoption is high across generations, younger demographics are notably higher. This comes as no surprise given their mobile-first lifestyles.

When looking at order frequency, the power users stand out:

• 60% of Americans order delivery at least once per week (Zippia)
• 20% of consumers order 2+ times each week
• Top 10% of heavy delivery app users place 88 orders per year on average (McKinsey)

Friday stands out as the peak day for delivery orders, while Saturday also sees heavy volume. And dinner (evening meal) accounts for a full 68% of orders compared to just 25% at lunch and 7% for breakfast (McKinsey).

Notably though, consumer dining habits shifted substantially during peak COVID-19 lockdowns:

• Weekly delivery orders per customer doubled from 1.3 to 2.5 per week
• Average order sizes increased 23% from $28.50 pre-pandemic to $35

But rather than entirely revert back to pre-pandemic trends, analysts believe delivery customer retention will remain elevated going forward:

• 76% of new customers acquired during COVID continue using delivery now
• 21% say they expect to order delivery more in the future, while only 3% less

This “stickiness” even as dining rooms re-open demonstrates the permanence of food delivery’s adoption across consumers.

Grocery Delivery Finds Extra Growth With Data Analytics

While meal delivery still makes up the majority share of food delivery spend, grocery delivery is actually outpacing growth:

Table 2: Grocery delivery growth is surpassing meal delivery(Source: Statista)

Pandemic lockdown habits kickstarted a massive wave of grocery delivery adoption beginning 2020. But contrary to the assumption that these services would see declines post-COVID, growth has remained strong while meal delivery usage has actually dropped.

A key driver of grocery delivery’s “stickiness” is the underlying personalization and recommendation tech working behind the scenes. Apps like Instacart tap into various data signals to enhance convenience:

• Machine learning algorithms provide suggested items personalized to individual preferences and past purchases
• Predictive basket features take context like weather and time of day into account for recommendations
• Inventory availability data supplies out-of-stock visibility to minimize substitutions

As grocery players invest more into data science teams to finesse suggestions and gain subtleties on shopping habits, the overall experience improves. This makes routine re-ordering extremely convenient – especially when coupled with membership free deliveries.

Expect grocery delivery tech to continue raising the bar on personalization while using order data to streamline supply chain processes. With the added benefit of capturing essentials like grocery spend, Instacart and competitors seem poised to dominate food delivery long term.

Impacts Across the Food Industry

The shockwaves of food delivery adoption stand to impact stakeholders across the entire food value chain:

• For restaurants, optimizing operations and margins for off-premise dining becomes mission critical
• App providers must continue enhancing data analytics to remove friction while innovating with services like autonomous delivery
• Dark kitchens running delivery-only menus threaten to disrupt the restaurant landscape
• Ghost kitchen models lower barriers to enter industry but competitiveness rises
• Cloud kitchens optimize supply chains but require extreme operational rigor

Navigating these dynamics presents opportunities and threats for virtually every player involved production all the way through consumption. Understanding behavioral data and crafting savvy tech-enabled strategies separate winners from losers.

Looming Challenges Around Thin Margins

For all its meteoric growth and future potential, nagging issues around costs and business model sustainability still loom:

• Delivery commissions take big bites from already thin restaurant profit margins
• Services caught improperly utilizing customer data face backlash
• Cities enacting permanent fee caps on providers adds friction

On average, delivery represents just 5% of total restaurant revenue – making dependence on third-party apps risky (McKinsey). While essential for visibility, focusing too heavily on delivery channels triggers complex accounting around taxation and expenses.

Thin margins have also hinderedDoorDash and competitors alike from reaching profitability despite high revenue growth. In fact their net losses swell in parallel with their sales, putting pressure on execs to demonstrate a viable path forward.

On the consumer side, 41% maintain dine-in experiences remain superior to take-out ordering (Statista). Younger demographics seem more enthused by the convenience factor, but time will tell how loyalty trends as more dine-in options open up.

Emerging Innovations Like Autonomous Delivery Seek Further Disruption

While still early innings, innovations on the horizon like autonomous sidewalk robots and delivery drones threaten to shake up the status quo:

• Automatic sidewalk droids from companies like Kiwibotand Ottonomy enable low-cost contactless delivery to scale more sustainably.
• Delivery drones remove driver costs altogether but face regulatory hurdles around safety and mass adoption.
• Dark kitchens running sophisticated machine learning algorithms optimize menus specifically for higher delivery demand. More agile than restaurants, they intensify competition.
• Ghost kitchens lower barriers to enter industry but reliance strictly on delivery channels leaves no margin for error.

As margins tighten across the value chain, operators able to leverage emerging technologies to eek out efficiencies likely gain advantage.

More uncertain is how the average consumer responds to innovations like robot deliveries appearing at their doorstep. While novel at first, preferences around human interactions could swing preferences back toward traditional restaurants long term.

Time will tell, but with the addressable market for delivery still gaining momentum globally, ample runway exists for enterprising providers to unleash further disruption.

Key Takeaways on the Future of Food Delivery

Convenience catalyzed the industry’s explosive rise, but persistent consumer habit shifts suggest substantially more growth in store:

• Leveraging data and analytics remains essential for providers to deliver efficiency and personalization
• Grocery delivery services warrant attention with the added advantage of essential spend attachment
• Sustainability challenges around costs and margins must be resolved
• Emerging tech like autonomous vehicles or AI-powered kitchens could completely reshape existing value chains

One certainty as the food delivery shakeout continues: boring players clinging to the status quo face swift irrelevance in such a dynamic arena.