Food delivery business in the US: challenges and trends

The past 5 years has seen a meteoric rise in both the popularity and reach of food delivery, especially in the United States. There are too many reasons to list: extended days in the office; the proliferation of smartphones and delivery apps; rapidly changing tastes in the grocery and restaurant markets; and, of course, a global pandemic that shut down many restaurants’ dining rooms and left them yearning for income. 

Currently, 75% of the United States food delivery market are covered by DoorDash and UberEats — services to which restaurants and food service providers contract out their delivery operations. Added to this are online grocery deliveries, for which customers are even willing to pay extra.

The COVID-19 pandemic turned delivery, once a difficult business with razor-thin margins, into an essential service. Within the first days of the pandemic, Instacart, a grocery delivery service, saw downloads of its app increase by 218%, and Yelp data scientist Carl Bialik calculated that pizzerias, fast food restaurants and grocery stores saw enormous increases in consumer interest: 44%, 64% and 160%, respectively. Even as the public health situation begins to normalize and the world begins to return to its previous routines, the convenience of delivery has become the new normal. 

One of the most difficult challenges facing food delivery is the so-called “last-mile problem”: making sure that food can travel directly to a customer’s door, no matter where they live, as fast as possible to ensure freshness. Numerous radical changes have popped up to solve this, all of which focus on reducing costs before delivery. One of them is the “ghost kitchen”: a restaurant-style kitchen, even one not necessarily tied to a physical restaurant, that produces food for delivery. These are branded and then marketed on delivery apps, where delivery couriers on all different modes of transportation pick the food up and deliver it as fast as possible to its destination: in New York, for example, scooters and e-bikes reign, while in suburbs, services like UberEats leverage ridesharing logistics to delivery outside of densely populated areas. 

As is the case in many other industries, food service is also benefiting from advances in automation to reduce costs. These go beyond folding dumplings and squeezing orange juice — there are now machines that can put together a complete stir fry. When applied across larger chain operations or ghost kitchens, these technologies allow for even greater customization of dishes to meet customer demands. Even better, they reduce the labor involved in cooking and free up human resources that can help deliver these treats to even more customers. 

Many companies are even researching drone delivery. College campuses, with their closed premises and limited traffic, were an early test ground for ground-based automated delivery services, with little Mars Rover-style vehicles taking burgers and wings to hungry students. Now we can see an interest in aerial drones, delivering everything from parcels to pizzas to people that even cars would have a hard time reaching before their snacks got cold. Still, the technology is dogged by logistical limits. The kitchens providing the food must be close by, due to the drones’ short flight time and limited carrying capacity, and customers must provide an area suitable for a drone to land. Then, of course, there is the cost burden: a drone system is far more expensive to maintain than an e-bike or scooter, and requires highly skilled technicians that may not necessarily be available in all markets. Overall, this particular scenario is highly unlikely for mass-market food delivery. The logistical and cost barriers are far too daunting for an industry with razor-thin margins, and over the past several years, no attempt has gained any meaningful traction, even with the support of delivery giants. 

These challenges might seem daunting, but it’s important to remember that these are mere technical hurdles — and they pale in comparison to the challenge of widespread smartphone adoption. 6.7 billion smartphones are in use worldwide as of 2022 — almost as many as there are people in the world. Just think: the iPhone was only introduced in 2007. The delivery industry has made even more rapid progress, and busy, health-conscious consumers only stand to benefit.