The Race to Deliver

DoorDash. Munchery. GrubHub. Postmates. Uber. Amazon. The list of names to call for food delivery seems to double each week. But what’s different about this new generation of high-tech, venture capital-rich startups is that they’re not in the food business: They’re courier services focused on delivery alone, and they expand takeout options far beyond pizza and Chinese. 

In an October 2015 feature in USA Today, DoorDash chief executive officer Tony Xu explained why his business model is worth possible billions, despite modest per-order earnings. Consumers pay just $1 for the first order, and the average order is $4 to $5.

“Dining is the largest market I can think of,” says Xu, whose company is based in San Francisco.  “We eat three times a day, seven days a week. As a result, I do think consumers want choice.”

Do these services make sense for the grocerant game? Restaurant consultant Michael Whiteman, president of Brooklyn, N.Y.-based Baum + Whiteman, says he sees potential for grocerants to tap food courier specialists. He notes that “the clear trend is to partner with third-party delivery companies, which eliminates the need to add union workers to a supermarket's payroll, or have non-union employees standing around waiting for orders to roll in. That task gets transferred to new companies that are supposed to be masters of logistics."

Some analysts see room for more delivery services because the food market itself is big enough to give plenty of companies a piece of the pie. Other experts are not as bullish. A September 2015 report in Crain’s New York Business finds reasons to pump the brakes. A few late deliveries can sour customers on these services, and rumors that big food brands like Dunkin’ Donuts and Starbucks want to take delivery back in-house could change the competition.

Still others worry that speedy delivery “could mean that people never need go to a supermarket, and therefore food retailers need only central production-storage-delivery depots and a very smart smartphone,” Whiteman says. But, he notes, “Despite Amazon, there still are bookstores.”

Grocerant-Ready Ideas:

• Partnering with a delivery service to leave the logistics to an established, trusted brand
• Clever takeout packaging options with store logos on full display
• Building relationships with local businesses for large-scale orders, especially during the holidays