Helping couch surfers find your drinks, other add-ons: Delivering on delivery
Editor's note: This is part 1 in a multi-part series of commentaries and blogs called "Delivering on Delivery." Click here for part 1.
Off-premise dining and third-party delivery have come to dominate the dining scene, and it's not a fad: about half of all consumers now say they'd prefer to eat your food in the comfort of their own home.
Don't take it personally. More than one in three consumers simply don't want to leave the house but still want restaurant food, while 30 percent believe the convenience is worth the cost. And consumers are not shy about putting their dollars where their laze is: last year saw a 28 percent increase in delivery orders, coupled with the expectation for a 12 percent compound annual growth rate (CAGR) over the next few years.
Much focus has already been placed on operational challenges such as staff hiring and training, ordering and point-of-sale systems, product quality, food prep, and packaging. These are all legitimate concerns that must be addressed, especially in an industry that suffers from high employee turnover and its general lack of employee enablement tools.
And then there's the delivery process itself. Most brands now rely on third-party delivery services like GrubHub and DoorDash. Avoiding the logistical and financial headaches is usually worth the financial downside, although it's worth noting that third-party delivery services may gobble up as much as 50 percent of a restaurant's margin, thanks to commission and delivery costs.
But staffing, logistics, and margins are only the obvious risks. The scarier part is that fast-casual and quick-service delivery orders generally offer less gross margin overall than dine-in purchases. Why? Customers are less likely to order menu items that have higher profit margins when they are purchasing for delivery.
Take beverages as a clear example. Whether it's soft drinks, bottled water, coffee, tea, or alcoholic drinks like beer and wine, these high-margin restaurant items are already in customers' refrigerators at home. They came from the grocery store for a fraction of the cost. And unlike your menu items, these home-sourced items are exactly the same products.
But there are three ways to adjust your strategy to regain lost margins.
Beverage LTO: We all know the power of limited-time offers (LTOs) for entrees, so why not leverage it for add-on items with delivery? Make the LTO something consumers may not naturally have in their fridge (unique soda, juice or water flavor) or offer a drink that requires effort (smoothies, pressed fruit or vegetable juices).
Beverage Bundling: Why not couple one of your meal LTOs with a beverage? Chick-fil-A did this last year with their Watermelon Mint Lemonade, which was pitched as the perfect complement to the Smokehouse BBQ Bacon Sandwich. Joint products, especially LTOs, are effective at encouraging the fear-of-missing-out anxiety (#fomo) that drives sales.
Two trends are commingling: the modern LTO and the modern delivery service. Taken together, they present an opportunity to grow share while also protecting margins. At a time when 46 percent of consumers use their smartphone at least once a month to order takeout or delivery, you have a prime opportunity to place LTO items front and center on order pages, in social media, and on your website.
Matt is the Founder and CEO of Inkling. His vision for the future of how people communicate drives Inkling’s strategy, product development and culture. He leads Inkling to make the world a smarter place. Prior to founding Inkling, Matt spent eight years at Apple, growing the use of its products in education and the sciences. He holds a Electrical and Computer Engineering degree from Harvard Universitywww