Is The Golden Age Of Food Delivery Apps Over?
Convenience is everything in the modern world. If something can't be done quickly, it is very often cast aside as a cumbersome obstruction. Who wants to make a phone call or pay cash, when you can click a button? Speed and convenience drive the rise in modern technology like self-checkouts, and food delivery apps. Pymnts reports that the "convenience factor" drives up to 65% of delivery-app usage (via Pymnts).
Using a takeout app couldn't be simpler: excite your brain with the multitude of tasty options, press a few buttons, and before you know it you're on the sofa, stuffed and unable to move. Such ease has helped to make the global food delivery market worth over $150 billion, according to McKinsey and Company – $26.2 billion of that just from the U.S. (per Business Wire). That's a lot of pizza.
But, despite those booming figures and Bloomberg Second Measure noting an 8% increase in U.S. food delivery sales, NBC News cites the fall in share prices of major delivery companies Uber Eats and DoorDash (as well as financial issues at Grubhub) as evidence that the hype of food takeout apps is over. But is the food delivery industry faltering, and how are the big three companies fairing?
Food delivery apps struggle to make profit
NBC News reported the problems facing food delivery companies. Inflation pushing up the price of food and gas (forcing people to restrict spending) is one of them, as is people becoming less reliant on home eating than they were during the COVID-19 pandemic. Customers are also choosing to dine out more and may be concerned by high delivery app charges.
MarketWatch notes that food delivery is widely unprofitable, despite large revenues. According to Business of Apps, DoorDash has never made a profit – although the company is optimistic it will do, reports FreightWaves (even though it admits pressure from the above struggles). However, Grubhub's inability to create profit has led to it being put up for sale by its parent company Just Eat, reports the Evening Standard. Uber's delivery section mainly comprises Uber Eats (explains The Guardian), and has managed just $30 million profit on $14 billion of sales, reports FreightWaves.
Given economic challenges and elusive sizable profits, it may very well be that the golden age for food delivery apps is over, and the market is still evolving. Although such a large market is unlikely to disappear entirely, it may be that some companies are unable to stave off competition from their rivals (and end up being swallowed).