In 1994, a customer placed an online order for a pizza from Pizza Hut, marking the first ever online order recorded in the United States. And while online ordering methods have diversified and become more widely available since, the general premise remains the same. Consumers wanted - and today crave - a convenient way to access goods and services from the comfort of their home. And in today’s digital-first world, consumers want to order from anywhere, at any time.
Since the first online order was placed in 1994, massive industry digitization and demand for intuitive online ordering experiences have led to swift innovation in online ordering technology. By 2015, the rise of online ordering began to overtake phone ordering, and by 2016, three percent of the 61 billion U.S. restaurant transactions were attributed to online orders. This technology continued to evolve alongside smartphones and increased access to on-the-go ordering methods, creating a pool of eager investors all hungry to capitalize on the demand.
Read on as we walk you through the evolution of online ordering, a transformation most recently impacted by the emergence of a global pandemic. We also share more about the differences between native online ordering solutions and third-party aggregators. You’ll learn how each approach benefits consumers and operators in different ways. Hopefully, you will take away a better understanding of which option makes the most sense for your business.
Ordering food and goods online or via a mobile app has gradually taken off in recent years, but the emergence of COVID-19 in 2020 generated meteoric growth in online ordering and direct-to-consumer delivery and pickup options. COVID-19 unexpectedly revolutionized the in-store experience in a matter of weeks, and online ordering became the primary revenue source for many restaurants and retailers.
Prior to COVID-19, consumer habits were already trending towards digital-first means of making purchases. However, in May of 2020, U.S. eCommerce sales jumped by 92.7 percent, and consumers spent more than $53 billion via eCommerce in the U.S. in April and May.
Gourmet breakfast concept Eggslut noticed a significant shift in customer behavior when COVID-19 struck the restaurant industry. Delivery orders jumped from 25 percent of their business to 90 percent in a matter of weeks. Retailers are experiencing a similar trend in 2020; they’re reporting a 68% increase in online year-over-year (YoY) revenue growth as of mid-April.
Whether operators pivoted through third-party aggregators or enabled native online ordering through their point of sale (POS) solution, the need for flexible, digital-first solutions is more important than ever before to meet, and exceed, today’s consumer preferences.
While in-store traffic has long been a component in how merchants do business, COVID-19 forced retail giants like Zara to rethink their store footprints and even close locations entirely in order to focus on digital sales. More than ever before, businesses are investing in resources to help translate a positive in-store experience to an online ordering and delivery experience.
“For years, merchants have been working to extend their brand experience off-premise,” explains Chris Lybeer, chief strategy officer at Revel. “The effects of the virus are fast-tracking that goal, and many of our clients have expressed that they’re allocating resources to compete digitally.”
As businesses continue to adapt and rethink how they operate, a pervasive question remains: which adaptations and investments will outlive COVID-19 and still meet consumer demands?
With increased smartphone penetration in the early 2000’s and the growth of Uber and other mobile-first services, food delivery startups began to take off with consumers. Today, major third-party players such as Uber Eats and DoorDash make up 40% of the 20 most-used apps.
With third-party online ordering, operators choose from a number of different apps for a solution that integrates with their POS. A perk to this approach is instant access to the app’s network of delivery drivers. Additionally, this approach exposes a brand to customers who already browse these apps regularly. However, the downside to this approach includes the fees and commission costs that can grow pretty quickly with every order. In some cases, aggregator fees are larger than the cost of goods sold (COGS) and labor for many merchants.
In 2020, Uber and Postmates announced a $2.65 billion dollar merger, narrowing the third-party delivery market down to three major players. While DoorDash still remains the largest competitor, the merging of Uber and Postmates will make them the second largest.
Outside of mergers and clear growth, third-party delivery providers are also evolving their business models and consumer sentiment evolves. DoorDash quietly entered the first-party ordering market with the launch of its own online ordering system in 2020, allowing restaurants to build native websites and apps.
While third-party restaurant aggregators were already a popular online ordering option, the COVID-19 pandemic resulted in a surge of new downloads. In fact, spending on meal delivery services was up 70% year-over-year in the last week of March, 2020. Knowing delivery was only going to increase in popularity, many operators have sought out partners like Deliverect.
Deliverect allows restaurants to push all delivery orders from third-party players like Uber Eats, Deliveroo and Just Eat directly to their POS, creating a more streamlined experience for staff and customers alike. By eliminating the need for manual order entry, restaurants can significantly reduce delivery times. Deliverect also enables centralized management, allowing operators to adjust and publish menus across multiple channels and locations with ease.
Selecting a point of sale with an open API makes it easy for third-party partners like Deliverect to build on a business's existing infrastructure and extend their offering, especially during a time where flexibility is required to survive.
Native solutions offer online ordering that’s built directly into the POS. Opting to use native solutions offer businesses optimal control over their offering by eliminating third-party regulations and growing fees associated with their programs. Native solutions also enable merchants to control the customer experience. The ability to customize the user interface and create a fully-branded customer experience can drive increased loyalty and encourage return visits.
Takeout or curbside pick-up are made easy with native solutions. However, businesses do need to consider how they will manage delivery logistics if delivery is a service you want to offer. Many point of sale platforms, including Revel, integrate seamless delivery management facilitated through software that helps operators manage orders from both owned platforms and third-party aggregators.
Delivery in general has emerged as a must-have during the COVID-19 season. Despite the popularity of third-party providers, new data illustrates a consumer lean towards native online ordering channels.
The rationale behind these consumer preferences is likely due largely to fees associated with third-party providers. On average, 30 percent of an online order placed through a third-party application can be attributed to fees incurred by the customer and restaurant. But regardless of these fees, third-party providers have seen massive spikes in pandemic sales. While consumers may prefer to order natively, accessibility and brand recognition resulting from large marketing budgets often leave customers defaulting to third-party delivery.
As consumers become increasingly dissatisfied with third-party fees and first-time digital consumers enter the market, restaurants and retailers alike are presented with a big opportunity to get their native online ordering and delivery channels in front of customers.
The ability to order food and goods from the comfort of home was already skyrocketing in demand prior to COVID-19, but the global pandemic resulted in an even greater demand for digital-first ordering methods. And that demand is accelerating the industry’s evolution alongside consumer trends. Restaurants and retailers have already begun to rethink their brick and mortar operations, focusing on drive-thrus, contactless ordering, and of course, seamless online ordering experiences.
Whether online ordering is set up through your POS solution or a third-party aggregator, it’s critical to be able to reach consumers through remote channels. Understanding the online ordering options that exist today will help you decide what’s best based on the size, set up, and budget of your business.
With the right solution in place, you’ll be equipped to meet and exceed your customer’s on-the-go ordering experiences.
Revel’s point of sale and business management solution provides a native, cloud-based technology platform that is at the heart of clients’ businesses. The Revel platform helps restaurants and retailers deliver a digital-first customer experience, diversify revenue streams, and scale their businesses with ease.
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