ALEXANDRIA, Va.—The food-delivery market is changing, as the industry evolves from pandemic-induced growth and Americans grapple with economic conditions that put a strain on their wallets, reports the Wall Street Journal.
Industry experts say that although consumers are still spending more on Uber Eats and DoorDash, they are cautious about how much they spend, changing what and how much they order and are migrating to in-store pickup.
DoorDash Chief Financial Officer Prabir Adarkar said in an interview that “most people have a budget,” but that delivery “continues to remain part of their daily life. They are just adjusting their behavior.” He added that some consumers are trading down to fast-food from expensive restaurants or they are cutting back on how much they order.
Pickup is becoming a way for customers to save a few extra dollars by not paying delivery fees, say restaurant executives.
“As pocketbooks get a little more strapped, you are seeing a lot more folks mobile ordering and grabbing their food and bringing it back home,” Wendy’s Co. Chief Executive Todd Penegor said in an interview.
According to NPD Group, fast-food delivery orders were down 11% year over year in the 12 months through November, but pickup orders increased during that same time period. The Journal reports that some restaurant chains say their customers are ordering fewer or cheaper items, especially lower-income patrons. Shake Shack has said they are losing lower-income customers and don’t expect this trend to stop.
“This is just part of the general move to getting back to behaviors pre-COVID,” Chipotle Mexican Grill Inc. CEO Brian Niccol said in an interview.
DoorDash and Uber Eats control 90% of the U.S. food-delivery market, and although they have seen record sales expansion, growth is cooling, reports the Journal. Orders placed on major food-delivery apps grew 5% on average in October and November year over year, which was the slowest two-month growth period since the pandemic. Spending was up 9% in the same time period, which was also its slowest pace in more than two years.
Grubhub has been playing catch-up, with orders and spending on the app falling. Its European owner Just Eat Takeaway.com has been exploring the sale of Grubhub since April 2022.
However, industry watchers predict growth for DoorDash and Uber Eats, but analyst Robert Mollins at Gordon Haskett Research Advisors told the Journal that a decline in DoorDash’s website traffic suggests order volume will cool more than other analysts are anticipating.
DoorDash told the Journal that it consistently outperformed market expectations. Predictions based on app downloads, web visits and email receipts have “regularly failed at accurately estimating our growth,” a company spokesperson told the Journal via email. The company said it believes spending will increase as much as 27% year over year in the current quarter.
The apps say that subscribers spend more, order more frequently and bring in recurring revenue. Consumers who are budget-conscious are utilizing subscriptions to save money. Uber Eats reports that 40% of its U.S. orders as of late December came from subscribers, up from 27% in the same period a year earlier. The company promoted an offer during the holidays that allowed customers to gift an Uber Eats membership for half off the annual subscription cost.
In July, Grubhub partnered with Amazon to give all Amazon Prime members a free, one-year trial of Grubhub+.
At the time, Grubhub reported that more than half (53%) of adults and nearly two-thirds (64%) of millennials said that purchasing takeout and delivery food is “essential” to the way they live, but only one-third (38%) of Americans report using third-party delivery companies like Grubhub at least some of the time.
(NACS wrote about what is going on with third-party delivery apps, exploring how these apps face mounting expenses, sluggish investor interest and layoffs.)
According to NACS’ “Last Mile Fulfillment in Convenience Retail” report, 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, little access to consumer data, difficulties delivering age-restricted products and service and operational issues.
Read more about these challenges and what c-stores are doing to make delivery work for their businesses in “Delivering Convenience” in NACS Magazine.