In Favor Of Delivery: The Growing Omnichannel Store-To-Door Ecosystem

When it comes to omnichannel execution, the rich keep getting richer. The Q2 2016 OmniReadi Index™ takes a closer look at “omnichannel readiness” — “omnireadi” for short — and, as it turns out, there’s an enormous gap between the merchants who are the most and least omnireadi, and that gap is getting larger. The Index also breaks down why this chasm continues to grow.

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ByPYMNTS

Posted on June 21, 2016 

For years, food delivery options in many cities could be boiled down to two dominant categories: pizza and Chinese. Saddled with growling stomachs and empty fridges, as well as no motivation to leave the comfort of their homes, delivery was all about convenience, despite the lack of options.

However, as smartphones ascended to ubiquity – and on-demand sharing services like Uber (launched in 2009) became the norm – new options began to emerge. After all, if consumers could make a town car appear at their doorstep with a swipe of their finger, why couldn’t they conjure up a burrito? Or an iced coffee? Or, for that matter, even a lobster dinner?

Enter the rise of third-party store-to-door delivery apps. These programs — which include apps like GrubHub, Foodler, Favor, Seamless and DoorDash – operate independently of merchants, acting as middlemen between in-home consumers and various eateries. Typically, the programs charge a delivery fee of around $5-$10 in exchange for bringing a wealth of delivery options to consumers’ doorsteps. Many of these apps also offer store-to-door services beyond food as well. Favor, for example, will deliver everything from prescriptions to dry cleaning.

Since emerging on the scene and opening up culinary choices for diners across the U.S., these services have gained notable traction with customers who are hungry for fare with flair.

Recent market research performed by the NPD Group revealed that delivery traffic outside of pizza has expanded by 33 percent since 2012. That’s a hearty slice of the delivery pie.

Also, Mintel’s Foodservice Trends 2016 report found that 77 percent of Americans said they would use online food delivery services. Of those who already utilize these store-to-door programs, the study found that 51 percent order meals from casual dining restaurants.

Besides a desire for diverse delivery choices, the central factor in store-to-door app adoption is the ever-growing push for streamlined convenience. According to Mintel, one-third of online delivery users would even be willing to accept higher delivery fees if it meant receiving their food faster. This demand for timeliness and simplicity is evidenced by the demographics with which third-party delivery services are being most enthusiastically embraced: millennials, parents with children under 18, and city dwellers.

But while store-to-door, on-demand delivery services may have broken gastronomic ground when they first gained widespread use, their current pervasiveness means each program must reflect the omnichannel experience that customers have come to demand – and in many cases expect – from a growing number of industries.

PYMNTS recently caught up with Keith Duncan, Senior Vice President of Sales and Business Development for Favor, a store-to-door service officially launched in 2013, to find out more about the digital delivery space and its role in bringing restaurants into the omnichannel ecosystem.

Satisfying consumers’ cravings for convenience

With the desire for seamless omnichannel experiences eclipsing cost as the most important factor in food delivery, it’s no wonder that store-to-door apps aim to provide simple yet secure payment processes to stay competitive. In Favor’s case, the service is completely cashless, as all transactions take place directly in the app.

“When you order your first Favor, you’ll enter the payment information, which we store securely. You only need to enter your payment info once,” Duncan said.

Favor then offers consumers the ability to personalize their payments – if they so choose. In the name of convenience, the program resorts to a default payment setting after a short window of inactivity.

“After you place a Favor, you will have a short time after it’s been processed to proactively pay. During this time, you can add a promo code, change the suggested runner tip, and choose which card you’d like to use. After this short time, we will automatically charge your payment methods with suggested tip – minimum of $2,” he said.

For third-party delivery apps, customer service is another area where omnichannel technology is in demand.

After all, consumers who order and pay in one app also expect that app to be a resource for their questions and complaints. According to Duncan, Favor fields inquiries surrounding both its own operations and mishaps that are the restaurants’ responsibilities. The app’s customer support team handles all facets of complaints, including negative merchant reviews, for which it reaches out to stores on the customer’s behalf.

“The customer, food safety and quality comes first. It is our passion to provide the best service possible so we constantly need to evolve our process and system to meet the demand of our ecosystem (the customer, runner and merchant.) All three need to work in balance in order to make the service perfect. Especially when it comes to food, expectations across the board are high. We need to be an extension of our partners’ service and brand.”

It’s easy to understand why Favor and its counterparts continue to gain users – ultimately, consumers can stomach a $5 fee when it comes with a multitude of menu options and the promise of home delivery.

For merchants, however, the relationship with third-party services is a bit more complex.

Bridging the gap between restaurants and technology

While consumer demand for convenience has prompted numerous industries to expedite their embrace of technological integration, the food and beverage sector – a sector that drives many consumers to Favor – has been notoriously late to the omnicommerce party.

The National Restaurant Association’s “Restaurant Technology Survey 2016,” recently revealed that 80 percent of restaurant operators are aware that technology can increase sales, boost productivity and give them a competitive advantage. However, 40 percent of table-service restaurant operators and 42 percent of independent restaurant operators consider their stores to be lagging in technology.

According to Duncan, restaurants that continue to trail behind the omnicommerce movement will face difficulties in an integrated world.

“They need to embrace the shift in consumer behavior enabled by mobile and the expectations the on-demand economy have created. [Favor’s] ultimate goal is to show how you can reach new customers and incremental sales without cannibalizing their existing business or causing more work,” he said. “If anything, embracing omnichannel should help increase margins and make their business more profitable. Restaurateurs are passionate about their food and their business. We want to enable them to focus on that.”

The main obstacles preventing them from evolving into omnichannel merchants? Cost of implementation (63 percent), lack of infrastructure (50 percent), service and repair (49 percent), per transaction costs (49 percent), customer acceptance (48 percent) and staff training (44 percent).

Duncan explained that omnichannel delivery apps like Favor are helping eateries offer consumers a cutting edge service unmitigated by these issues.

“Most local restaurants and merchants do not have the resources or time to offer comprehensive store-to-door solutions so we try to do the heavy lifting for them and provide a delivery option without the headaches or upfront costs,” he said. “We bring both the audience and the workforce. We also offer a solution and process that this is frictionless to their day-to-day operations so our orders are seamless and no different than any other customer.”

Flour, a Boston-based bakery with multiple locations across the city, is among the eateries Favor users can order from. According to its owner, Tanya Li, the bakery’s menu is available on multiple third-party delivery sites, and she typically sees around 10 to 15 orders get picked up by these services each day.

While consumers enjoy a seamless omnicommerce bond with store-to-door programs, the merchant/ app relationship within these solutions is still being ironed out. Although on-demand delivery apps bring in additional orders to restaurants like Flour, which relies heavily on foot traffic, the two factions occasionally run into communication issues.

Li explained that her restaurants have ever-changing menus featuring made-to-order dishes, and it’s not uncommon for Flour’s most popular items to run out before the day is over. Minute discrepancies like these can easily be resolved in direct orders, but there’s currently no system in place to alert third-party apps of these hour-to-hour differences that are quite common in the fast-paced restaurant world.

While the omnichannel experience offered by third-party services to consumers has yet to fully reach the merchant side of the operation, apps like Favor do offer some benefits to restaurants, especially those with no plans to pour resources into an in-house delivery team.

Although Flour has its own group of drivers for internal deliveries and major catering events, the bakery would need to hire additional couriers and purchase more vehicles – a major initiative Li currently has no plans to invest in. Similar fast-casual and sit-down eateries that may want to expand their clientele without breaking their budgets could leverage store-to-door services as a method of reaching consumers they’d never get in person.

Stepping into the future of store-to-door

For now, third-party services are helping to fill a vital role in the journey toward comprehensive omnicommerce. Favor’s goal of helping customers “discover the best local places and experience dining in new, convenient ways” has, in many ways, become a reality, as diners across the country continue to embrace the app and its counterparts. Even the services’ imperfections are raising important questions about omnichannel implementation in fast-paced, personalized industries.

As a growing number of store-to-door services are released, however, the digital delivery space will likely look a lot different in the next five to 10 years.

“The market is still new and exploding … clear winners are yet to be decided,” Duncan explained. “Building trust as the go-to platform means a lot of things. Constantly exceeding customer expectations and focusing on building an amazing product is a good place to start.”