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Food-delivery services adapting to the grocery business

 

During covid-19 many food delivery apps have found a way to thrive and grow their businesses capitalizing on their ability to provide food to their customers for an affordable price. Along with this growth, these apps have begun to supply consumers with groceries in order to continue to facilitate growth. During the pandemic, several food delivery businesses have begun to sign up supermarkets to use on their platforms. 

A big factor that influenced this strategy was the effect of covid-19 on the general public’s shopping habits. While normally people would be going to supermarkets for grocery shopping at a constant rate, the pandemic has caused shoppers to be more hesitant causing them to shop less frequently and buy more items in bulk. The ease of online delivery allows for customers to make quick purchases in between grocery shopping as well as set up larger orders that can schedule deliveries on the same day every week.

The issue with the grocery business is how small the margins for profit are. “When Deliveroo or Uber Eats delivers a meal for an independent restaurant, they typically pocket up to 30% of the order value in commission and still end up with a loss…  [supermarkets] can only afford to hand over a 15% or 20% fee in many markets” (WSJ). Other hurdles include the jump in price that goes along with ordering on a delivery app, orders delivered on motorbikes arrive more quickly with the downside of not being able to carry too many bulky items.

A company based in Berlin called Delivery Hero managed to cut down the middleman and set up bunches of food warehouses that source food from suppliers without going through supermarkets. Delivery Hero is also able to increase its profit margins by manufacturing its own products.

 

The question to ask is: can these food delivery apps compete with large supermarkets? While both delivery apps and grocery stores have achieved growth and success during the pandemic, will consumers continue to use their services once the pandemic dies down and more vaccines have been administered?  

Author: Liam Cleary

References:

https://www.wsj.com/articles/can-uber-eats-delivery-hero-and-doordash-make-money-in-the-grocery-business-11616151637

https://www.wsj.com/video/the-coronavirus-may-forever-change-grocery-shopping/2913D928-D3A3-442A-960E-CC526446BDE3.html

 

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