Services like Uber Eats or Glovo increase their commissions and slowly tighten their grip on the delivery market. Yet when used properly and consciously, they can be rocket fuel for an established and a newly founded cloud kitchen alike.
Uber Eats is the iconic food delivery service that has reached the position of a market behemoth. According to the Statista data, the company holds one quarter (25%) of the US food delivery data. The largest delivery service – DoorDash, holds a 59% share of the market, and the third largest player – Grubhub – holds the share of 14%.
According to the recent analysis delivered by Reuters, the market, boosted by the unexpected events of the pandemic, is going to face consolidations, with the largest players slowly swallowing the rest of the competition. For the restaurant industry, it is basically about reaching the point that has been witnessed by the digital marketing segment – there are only digital behemoths like Google or Microsoft to work with, with little to no local players and ways to build the reach without them.
From the cloud kitchen’s point of view, this situation has some benefits, actually.
What is a cloud kitchen?
Cloud kitchen is a new concept of running a restaurant. In fact, it can be even considered revolutionary. In the traditional approach, the core of the restaurant is the room where the meal is served. In the cloud kitchen, an online or telephone order is the only way to get the meal delivered.
While odd at first glance, the concept is built around the rising popularity of food delivery. The cloud kitchen delivers meals using either its own popularity or popular food ordering platforms like Uber Eats or Glovo. Considering that, there is a lot more flexibility in the business, with the company getting huge savings on:
- Staffing – the restaurant staff is in fact reduced to the cooking team and back office to support the smooth operations
- Rental – there is no need to invest in localization with a high footfall, as there is no footfall at all in the restaurant. On the other hand, it is crucial to have a localization with good commuting. By that, renting a warehouse in the district neighboring the downtown can be much better for a cloud kitchen than to rent something in the central district.
- Media – the company enjoys the savings on multiple media – there is no need to deliver lighting or warming to the place with guests – there are none. The same goes for the huge, energy-consuming outdoor ads.
- Branding – last but not least, the interior is one of the key components of restaurant branding. This includes the design, the menu, colors of sheets and chairs, and so on. The cloud kitchen branding comes only from the digital activities – these are not cheap, but much more scalable and the restaurant enjoys a significantly lower entry barrier.
More information about cloud kitchens and the business model that stand behind this approach can be found in the blog post about Cloud Kitchen – the new model of operations in hospitality.
What is a service integrator in the restaurant industry?
The concept of the service integrator has been coined in the IT industry. It has initially referred to the situation when the single company has delivered multiple services or orchestrated the delivery, to ensure the client gets the package he or she wants. In the tech segment, it is usually about hosting. bandwidth, coding platform, and infrastructure, that enables the company to deliver desired services.
In the food industry, the concept applies to the services like Uber Eats or Glovo, where the platform provides both the restaurant, the payment method, and the delivery. By that, there is little to no effort the user needs to invest. He or she saves the time that would have been used to find the desired food, the time of delivery, and the effort of paying for the food. Usually, it reduces the trip to the restaurant to the several clicks done on the mobile phone.
From the restaurant’s point of view, the platform offers a package of online marketing tools, delivery, and payment processing service.
Benefits of integrator services for cloud kitchen
Services like Uber Eats or Glovo are considered controversial, mostly due to the high commissions they operate on, effectively eating (pun unintended) the profit margins of the restaurant the platform works with. While this remains true, there are multiple benefits that come from the cooperation.
First and foremost, these platforms give the user the access to the huge market share with little to no effort. As mentioned above, two major players (DoorDash and Uber Eats) hold more than 80% of the whole US food delivery apps market. By that, the restaurant can reach an immensly huge customer base for a price of a commission.
This situation can be in fact compared to renting an expensive placement with a dense footfall – the stream of customers is a tradeoff for the high rental bill.
Access to the customers is the first step toward building the brand awareness of the restaurant. Without this reach, it is also possible, but much more difficult.
Brand awareness in the food delivery segment is built by delivering exceptional purchase and customer experience – unique packaging, great taste, and innovative offer. Yet to do so, the company needs to get access to the customers who have never encountered the company before – and the service is a great place to do so.
Brand awareness is also a tool for improving the profit margins as well as driving the sales out of the platform. According to the Oberlo data, 46% of customers are willing to pay more for products of brands they trust. Also, when the relationship with the brand is forged, the users are possible to reach using other channels – for example, social media or email marketing, effectively reducing the cost of reaching them.
Considering that, a great experience delivered on the platform results in both the possibility to improve margins and reduce the cost.
Outsourcing the logistics
Uber Eats, Glovo, or DoorDash come with a network of couriers, ready to deliver the food at any time given. This comes as an external service, so the restaurant owner needs not to provide the courier with monthly payments, tools, or care about leaves and payroll.
According to the data delivered by Statista, the e-commerce logistics market will be worth up to 493.52 billion euros by the end of 2022 and will keep the current dynamics of growth reaching 770.79 billion euros by 2026.
From the cloud kitchen perspective, it is a highly convenient deal – the courier just comes in to take the food and the rest is done by the service provider.
What can be unseen at the first glance, platforms like Uber Eats or Glovo are in fact an effective and powerful marketing platforms by themselves. Depending on the resources and commitment, the company can have huge demand boosts when the promotions are done properly.
The platforms enable the user to deliver the image of the food, and the description and to set up promotions. Also, there are paid plans that enable the owner to display his or her offer higher. Moreover, the algorithm that displays the results after the customer enters his or her query, can be probed to deliver a search engine optimization aimed to maximize the exposition in the organic search results.
Considering what’s above, the platform is also a marketing tool, powerful not only in building the brand awareness, but also in driving the sales.
Last but not least – services like Uber Eats or Glovo should be considered as yet another channel of sales. Nothing more and nothing less at its core. With this approach, the company can manage and measure the tradeoff between the price of customer acquisition.
While these platforms are expensive, they remain a reliable source of orders. Being that, they can be used to stabilize the cashflow when the company is investing in a more profitable channels, like owned ordering channel or social media selling.
Cloud kitchen is a challenging form of running the restaurant. The company needs to face multiple challenges – from the digital channels volatility to reduced margins and troublesome building brand awareness.
Service integrators provide great tools to kickstart the company’s development and boost revenue. On the other hand, when the restaurant relies only on this stream, it becomes harmful, as the high cost of acquisition leeches the profits.
If you wish to talk more about the ways the online service integrators can be useful for cloud kitchen, don’t hesitate to contact us now!