In the two years since the COVID-19 pandemic struck, the foodservice industry has gone from taking most orders from customers on premises to becoming dependent on third-party delivery apps and other digital sources.
Before the worst public health emergency in history, 12% of orders to restaurants and convenience stores that sell food were digital, according to a report released Thursday by Paytronix, a provider of technology solutions such as payments processing for the foodservice industry.
Newton, Massachusetts-based Paytronix estimates that 33 percent of orders now come from third-party delivery apps and other digital sources.
“Most of these customers are new, meaning many restaurants have seen a reset of about half of their customer base,” the report says. "Some in the food service industry feared that online ordering would ‘kill restaurants,’ but it’s becoming increasingly clear that these orders have done just the opposite, acting as a lifeline and helping them thrive."
Even though in-person dining is now permitted as pandemic restrictions ease with the decline of COVID-19 cases, many consumers prefer to take their restaurant and convenience store orders home.
According to Paytronix, in-store sales have slumped 42% from their peak in January 2020 while digital ordering doubled during the same time period.
Delivery customers are worth the effort for restaurants because they are loyal, the report said. About one-third of orders from delivery customers are from guests who order multiple times a month, Paytronix said. Meanwhile, of customers who simply pick up their takeout orders, only about 25% repeatedly order from the same restaurant or convenience store, according to the report.
“While delivery was king before and during the height of the pandemic, more recent data indicates that takeout orders now dominate online orders, with numbers even higher than they were pre-pandemic.” the report says. “Takeout jumped from approximately 35% of orders in January 2020 to a majority in March of 2022, a trend that appears to be increasing.”
Then there’s the issue of ratings left by consumers, which operators can't afford to ignore, Paytronix says, noting that delivery customers usually leave either very high or very low ratings.
“This is likely because, while the population of guests who order delivery is more loyal, there is a higher likelihood for order mistakes to occur when delivery is added to the mix,” the report says. “Delivery gets pretty much the same score as takeout, except for the categories of Service and Food, which tend to be the feedback questions most impacted when there is a slow delivery or missing item. This error is compounded by the difficulty of correcting mistakes off-premises.”
Meanwhile, a new grocery survey released Monday suggests that restaurants could be gaining at grocery stores' loss. Online grocery sales fell 3.8% in April compared with a year ago as delivery-related sales dropped 6%, according to the Brick Meets Click/Mercatus Grocery Shopping Survey. Average order value jumped 6% to $84 versus April 2021, only partially cushioning the blow of an 11% decline in order volume that was mainly driven by a 9% drop in monthly active users.
To be sure, restaurants continue to struggle too as economic conditions remain challenging, specifically rising inflation. The closely watched Consumer Price Index, for instance, recently showed that the prices for goods and services hit a 40-year high in March. Gas prices alone spiked 18% that month and were up 48% on a year-over-year basis, according to CNN.
According to the National Restaurant Association’s 2022 State of the Restaurant Industry report, eight out of 10 operators say using technology provided a competitive edge. The survey released earlier this year by the trade group also indicated that operators plan to increase their investment in technology.
One reason for the spending spree is the difficulty operators are having in finding enough staff. Seven out of 10 restaurant owners told the NRA that they don’t have enough workers to support their operations.
The association last May estimated 90,000 restaurants were temporarily or permanently closed in the wake of the pandemic. Still, the trade group's report this year forecasts restaurant and food service sales will exceed the pre-pandemic 2019 total.