Online Food Delivery Is Having A Bright Moment — But Clouds Are Gathering

It was once the (stereotypical) realm of ambitious teenagers and refuse-to-grow-up rockers and stoners who either needed extra bucks or found it too … uh … challenging to land better jobs. These days, however, food delivery means digital technology, entrepreneurship and global acquisition activity — and reasonable questions about how this will all shake out in the coming few years.

Recent acquisition news demonstrates the global appeal of food delivery as consumers across the globe gain the affluence and technology to enable such transactions. India-based online food ordering and delivery platform Swiggy has reportedly spent about $7.3 million to buy Scootsy, another Indian firm that offers online food delivery services

…Offering food delivery, especially through third parties, is hardly a guarantee that a restaurant will make money. Not only do delivery providers take a cut of the sale, but analysts said customers might be less likely to order such high margin items as soda and booze (assuming alcohol delivery is legal in a particular market) when doing delivery. Chains such as Domino’s and Olive Garden have declined to work with third-party delivery providers for such reasons.

And restaurants that rely too much on delivery also run the risk that too many orders that result in lukewarm food being handed over to consumers — to say nothing of wrong or forgotten items — will result in a backlash on social media and customer review sites. Beyond that, Stifel Analyst Chris O’Cull told a reporter that “restaurants will start to scale back on third-party relationships if they’re cutting into higher-margin dine-in traffic.”

For now, the future looks bright for online food delivery services, though there are early signs of oncoming consolidation, and perhaps even a growing reluctance of restaurants to entrust their reputations and revenue to third-party providers.


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