Summing up its recent restaurant technology symposium that included 15 restaurant technology companies and investors, Piper Jaffray Senior Research Analysts Nicole Miller Regan and Joshua Long looked at accelerating changes in the $1.6 trillion U.S. food market that’s now split 50/50 between restaurants and grocery stores.
The topline stat is $200 billion, as this is only the latest study projecting such a market opportunity for delivery in the coming years. That would represent 25 cents of every dollar in the restaurant industry. Diving deeper, the report focused on a few key findings as more restaurants move into the second or third phases of delivery experimentation.
The industry “may soon leak $35 billion of sales to the delivery marketplace,” and the report said that profitable models exist for delivery, but added “exclusivity is not rational.” Signing with one exclusive delivery provider versus working with several has become an increasingly hot topic in the wake of Uber Eats and McDonald’s reportedly renegotiating their landmark exclusive delivery contract.
Based on panelist sentiment rather than hard numbers, it noted that restaurant operators “should have the confidence to pass delivery fees onto the consumer.” With some providers restricting the ability of restaurants to increase prices for delivery, this topic has been gaining steam as more restaurants lose patience with economics that aren’t clearly profitable at the bottom line.
Part of the report zeroed in on the difference between direct and indirect deliveries. The restaurant fulfills direct delivery orders, while a delivery marketplace fulfills so-called indirect orders. The summary adds that “direct versus indirect digital orders may be the single best measure of health” in today’s restaurant industry.
Consumers prefer to order from the restaurant brands themselves, rather than through aggregators, the study also asserted. This is a notable finding, as restaurants typically pay a lower fee for delivery orders it brings to the third-party provider.
“The single most relevant near-term metric of health may be the percentage of direct digital sales,” the summary concluded. “From the restaurant operator’s perspective, the choice to process orders directly or indirectly has both a major economic and brand impact.”
Discussing the milestone that consumers now spend approximately 50 percent of food expenditures at home via grocery stores, Piper Jaffray’s analysts concluded that they expect “lines to blur as food purchased outside of the home will be consumed back at home at an increasing pace.”
This is your final warning to snap up stocks of Netflix and Match Group, as the future looks fine—just a little pale and in need of some sunshine, soup and human contact.