Consolidation a means to achieve business efficiency amongst delivery brands: IGD
Dark kitchens and niche delivery services too were seen to aid in business efficiency.
The UK delivery segment continues to fire up as brands looked to consolidate as a means to achieve business efficiency, IGD took note in their report.
The report highlighted the two major deals in the delivery sector, Takeaway.com's acquisition of Just Eat and Amazon-Deliveroo merger, which has been caught up in Competition and Markets Authority’s (CMA) separate probes.
Also read: Deliveroo, Amazon blast CMA's ‘speculative' probe into merger deal
It further looked at the UK's top three delivery firm’s battle to acquire brand partnerships to bolster their reputations, putting the spotlight on Just Eat’s high-profile delivery contracts with Greggs and McDonalds, two of the largest QSR chains in the country.
“The higher the profile of your brand (by coverage or by reputation), the better the delivery deal you may be able to strike. However, this could mean increases to order charges as delivery firms look to recoup costs whilst using the pull of the brands to keep customers hooked,” IGD senior analyst for food-to-go Nicola Knight commented on the sizzling delivery competition.
What’s with dark kitchens, niche delivery?
Also in the pursuit of business efficiency, food operators forayed into dark kitchens and virtual brands.
Last year, McDonald’s and Wagamama opened their own dark kitchens, serving delivery-only customers. For the Asian-inspired chain, the move has helped in their expansion “without the cost of a full restaurant fit out” whilst for the chicken giant, it meant allaying the pressure from branches serving huge visits to focusing on walk-in customers.
Moreover, brands like Frankie and Benny’s and Cafe Rouge have introduced delivery-only virtual brands. These offers menus different from their restaurants to target new types of customers.
“Companies entering this space can’t be complacent, however – virtual brands must work just as hard as traditional food brands to secure good reviews in order for users to trust them,” Knight suggested.
Meanwhile, niche delivery services offered by platforms like Supper and City Pantry were seen to resolve the concerns on the quality of food delivered to customers.
“With brand reputation at stake, there appears to be a role for premium food delivery services in the sector, although in time it’s likely there will be consolidation here too,” Knight added.
Careful use of customer data
Deliveroo recently invested in introducing delivery-only brands, along with providing consultancy services for partner restaurants.
Also read: Deliveroo allots £1m to introduce consultancy service, delivery-only brands
Knight noted the pressing issue on customer data ownership as restaurants only have generalised data from delivery partners. “Operators have always felt nervous about this and could feel more so since Deliveroo recently announced that it is developing its own virtual brands which could compete with its existing restaurant brands.”
“Delivery companies will have to use customer data carefully when balancing the needs of existing restaurant partners with their own new start-up brands,” she stressed.
