Customer Experience
A surprising detail from the pandemic is that while certain industries have seen significant losses from dramatic lifestyle changes (automakers and the service industry, for example) and the resulting changes in consumer behaviours - other industries are thriving.
Home entertainment is a prominent example of this forced adoption.
Companies that invested a great deal on on-demand screening (Paramount+, Disney+...) are reaping the rewards. So too has the video gaming industry, as consumers seek an escape.
Yet another has been the food delivery industry.
Offering “Quality groceries delivered in minutes” versus usual grocery deliveries, in which you book typically one or two weeks in advance. With mark-up on items usually around 10%, these on-demand, rapid delivery companies are offering classic and curated goods with no substitutions or missing items. Many even promote sustainability with electric vehicles and partnering with charities to donate excess food, something larger supermarkets have been criticised for in recent years.
As for delivery, there are three possible operating models: additional deliveries using incumbent couriers (i.e. already working for other delivery companies, like UberEats), brokerage platforms with access to couriers with capacity for more deliveries. The final option is that companies have their own fleets.
It’s an enticing offer. Many will perhaps remember the stories of homebound elderly people who couldn’t get a delivery for two weeks - even a month - during early lockdowns. And even though the pandemic cuased fewer logistics problems, companies still ran on reduced delivery slots due to operational issues.
But its selling point instead may be getting that single ingredient needed for tonight's dinner when there's no time to dash to the shops. Data collected by McKinsey & Company found that a third of surveyed respondents in France said they ‘probably’ or ‘certainly’ would order groceries online. Nearly half of respondents in Spain said the same. It has been suggested that a lack of supply has created the illusion of a lack of demand. During the pandemic, online supermarket Ocado reported a 100-fold increase in web traffic.
Investors have been inspired to fund the next round of growth, focussing on smaller, nimbler alternatives, encouraged by the pandemic to invest in businesses that are better positioned to adapt to changing circumstances. During the course of the pandemic, investors have put £10bn ($14bn) globally into on-demand delivery to encourage growth.
Furthermore, there may be some concerns to do with consumer health and the possible environmental impacts that may concern those interested in the growth of this niche.
Food delivery apps have been shown to have had a net negative affect on customer’s health when ordering takeaways. If instant delivery convinces users to get the few ingredients necessary to make it themselves (often cheaper, typically healthier), that suggests a possible small health benefit.
Success in this market will mean keeping wastefulness at a minimum, as well as concern over zero-hour contracts, which working for many of these companies mandates.
These are exciting challenges to confront while, in the near term, provide perhaps a necessary risk to this industry. A massive, unexpected change in consumer habits gave it wings. The next step is seeing how flies as things steadily return to some semblance of normalcy.
More Insights
