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Online Food Delivery Business – Focussing on the Demand

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Whitepaper Volume 2

The world has transformed from being a progress driven market to an accelerated performing industry. Every segment of the society stepped up and improvised to achieve what it would have otherwise done in many years ahead of this time.

Food businesses also grew from simple restaurant-type dining to many new models that helped customers relish professional chef preparations while staying safe inside their homes. Food business models were invented to meet the market demands of availing fresh restaurant-cooked meals at any time of the day, anywhere.

Despite the success stories, it is important to understand, in the interest of those aspiring to venture into this direction, as well as acknowledging those who succeeded, that the idea of delivering food to a customer’s home is a result of many minds at work.

Intervention from all directions, the food business owner, technology partners, working staff, and the ever changing consumer have been of paramount importance in building what facilities are being availed by people all around the world. Among many business models that came up and perished, a few managed to achieve what was intended.

Delving deeper into the model architectures, infrastructure, and flow we can identify the scope of growth and how to make the existing system better.

i. Popular Business Models

Working from the top, the models that offer end-to-end services related to food, to those that supplement restaurants or others in the last-mile delivery, are all functional with the support of technology. The interdependence of various technologies and resources enables the efficient delivery of food to the exact location requested while ordering.

The popularity of these online food business models is primarily based on the extent of connectivity a particular model is able to build between those serving and those ordering. The core architecture of all the models is built using the following components in different capacities as per the business model:

  • A message component – receiver
  • A notification service – for communication between stakeholders
  • Ordering component
  • Order fulfillment service
  • Dispatch service

The overall app architecture for an online food delivery service involves different services in different capacities, distributed between the front and the backend.

image5
An overview of an online food ordering and delivery service, the major components of the application developed to perform all the coordination and functions. 

On a broader view, the following online food business models form the majority of the currently running online food businesses. Discussing them here in order of increasing number of functionalities:

1. Order-only Model

As the name implies, the business model like that of JustEat and Grubhub, concentrates towards an interface that receives orders. The logistics and operations are managed by the restaurants. 

  • The interface, which in most cases is a mobile application or website, lists restaurants and their menus from the admin or owner’s end.
  • There is a customer or buyer interface, developed entirely for their survey and ordering purposes.
  • A restaurant interface or app enables the restaurant owners to receive, prepare, and complete the order, all at their end.

So, the business owner is concerned only in managing the interfaces, the apps and web portals, maintaining an uninterrupted network between the stakeholders, and earning on the basis of commission.

Want to start business like JustEat and Grubhub, explore the post

2. Order and Deliver Model

The online food industry is flourishing everyday based on the efficiency of technology platforms that enable making food choices and placing orders virtually. Business minds drew inferences from the market, and platforms were curated that sufficed to the demands.

The order and deliver business model, like that of Doordash and Deliveroo, is one of the most popular one involving smart platforms with multiple interfaces to maintain the operational flow of the business.

  • The admin owns the ordering interface with a list of restaurants, their menus catalogued systematically, and a delivery management segment.
  • The customer app engages them to select their order, and pay online.
  • There is a restaurant end of the application interface for order management. The orders received by the admin are displayed to the particular restaurant, which prepares the order and intimates online.
  • Signal picked up by the admin again, assigns delivery through the app.
  • There is a delivery segment of the network, with a dedicated interface for the delivery staff. The assigned orders are updated on the personnel’s dashboard, and completed on packet hand over to the customer.

Network connectivity between the interfaces is maintained by the business owner, along with the delivery responsibility to complete orders. The business model draws revenue from the subscriptions and commissions from the restaurateurs.

Read to start business similar to Doordash and Deliveroo

3. Fully Integrated Model

Amongst all business models, the one desiring highest investment in terms of monetary as well as the business owner’s attention is the fully integrated model. From listing food items on the platform or application to doorstep delivery, all components of the food value chain are entirely managed by the admin.

With this model the entire control of quality and operation is under a single stakeholder, like Sprig, Maple and SpoonRocket. The roles flow as assigned by the owner:

  • A platform or application is developed and launched by the admin or restaurant/business owner.
  • The website or applications enlists either:
    • Items from a kitchen owned by the admin
    • Cloud or ghost kitchens brought on-board
  • From receiving orders to arranging deliveries, expanding or scaling up the business, adding offers, earning through additional service charges, or all the profits, the business owner is the beneficiary of all.

The cost of maintaining a network between different stakeholders is saved here. A communication channel between the customer and the delivery staff is however to be streamlined for efficient services.

4. Aggregator Model

The aggregator, like Delivery Hero, is responsible to aggregate the nearby restaurants, kitchens, as well as delivery companies, onto a single platform to be viewed by customers for choosing, ordering, and organizing delivery.

The model, very similar to the ordering model, except that in the aggregator model, the aggregator itself can be a delivery business, arranging for delivery for the restaurants that come onto their platform to seek coordination.

  • There is a central platform on which different restaurants and kitchens register to display their menus.
  • A restaurant or kitchen interface, which is updated with their orders.
  • On being signalled back, the aggregator manages the delivery of the order.
  • A customer application that allows the customer to order as well as track their order progress.

There is a simple network connectivity maintained by the aggregator with the restaurant and the customer. The channel is managed for order completion by the admin, including the strategies for inviting more restaurants onto the platform.

5.  The Cloud Kitchen Model

This model is fast becoming the most upcoming and popular among the restaurant business owners. As it allows freedom to the admin or owner to control the operations with respect to managing the different staff and their roles.

Infrastructural requirements are minimal, with no actual restaurant to be maintained. Just a kitchen with cooking or food preparing staff and the effort going into developing an efficient platform enabling a streamlined food delivery process from end-to-end. Popular examples are Uber Cloud Kitchen, CloudKitchens.

  • The business owner develops an able platform that controls the food menu, order management, as well as delivery of the order to the customer.
  • A customer interface of the portal or application is built allowing them to visit, choose their favorite dish, and place the order. They are also able to track their order and receive updates on the order from the same application interface.
  • A driver’s application that helps them manage and complete their order out for delivery and update their status as well.

The app or kitchen owner is responsible for the complete process and all quality control. This way they can manipulate the services as per demand and situation.

As discussed, all these models are designed with the different components, the backend including the core app features, the communication modules, the BI, and the common segments of the frontend, developed in accordance with their significance for a particular business model. 

Details of each of the popular models running in the market allow an insight into the existing scope of improvement. The question is whether the existing architecture or technological interventions, with platform based offerings are enough to cater to the existing market demands or not?

ii. Demand and Supply 

The existing business models complying to online food delivery comprehensively cater to all types of demands. Consumer as well as market demands go hand-in-hand, and the supply generated is a response to fill gaps created by the changing trends and demands.

If we try and understand the dynamics around the demand within the online food delivery or food service models, we will observe that demand per say is modulated by three factors:

  • Price
  • Quantity
  • Time

So, the demand generates conditions that decide the price of the food commodities as well as delivery services. Also, demand and price are inversely proportional, finally implying on the quantity being generated. So anything selling at a high price automatically becomes less popular, and so the quantity being produced or served also becomes less.

law of demand

The Law of Demand

Fitting this logic into the food delivery service models, we can observe various parameters that are basically ‘demand determinants’ for the online food delivery services, and it is around these parameters the entire operations are executed:

  • Service price/cost
  • Item cost
  • Customer earnings
  • Geography
  • Lifestyle changes
  • Ratio of working women
  • Location and climate
  • Time
  • Customer preferences and awareness 
  • Marketing and advertisement of the service
  • Food and service quality
  • Internet connectivity
  • Modes of payment
  • Information quality and security
  • Application or Interface design
  • Regulations and policies

When we analyze the role of each of these parameters, their weightage in influencing the gap between demand as well as supply, despite intensive technological interventions happening around through various platform and application models, is quite evident. 

Depending on the nature of each of these, it can be inferred that the food delivery service industry is highly elastic. Even a minor change in the price, service quality, or internet security can drastically change the demand for a particular service, item, or even the market. 

Also, considering the buffet of options available to the consumer, the demand is all the more volatile. A potential foodpreneur can consider re-defining existing business models and interfaces by manipulating and managing these parameters. Understanding how to maintain standards in food quality, internet/cyber security while paying online, timely deliveries, and responsiveness to feedback can help retain consumers onto a platform service.

The significant point here is how many of these factors or parameters are within the scope of being regulated and maintained with the help of technological solutions. With an ever changing consumer nature, environmental and global factors leading to lifestyle changes, and time available to prep and respond to circumstances, will the online food delivery service providers be able to meet the goals.

Rising demand and ease of launching an online food delivery business has prompted many to venture into this direction. But weak market research, and a non-competitive predictive insight can lead to a half baked business offering. Operations begin to suffer if all aspects are not thought of through and through.

As we make an effort to decipher and address the major challenges faced by the online food delivery industry, we highlight aspects that must be well planned for a streamlined execution of the business model. Tapping the right technology, at the right time, and in the right way, can help reap market sustenance and long-term benefits.

Visit white paper Volume 3 for further details on food delivery business market.

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