When it comes to meal orders in the foodservice industry, we have reached the tipping point of Digital adoption. Just two years ago, Telephone was the dominant means of ordering for pickup and delivery, accounting for more than half of all takeout and delivery orders. Today, that proportion has shrunk to just over a third, with Digital Channels, consisting of Online and Mobile ordering, accounting for the majority. Further, Mobile ordering alone has jumped from 2% to 35% of meal orders made for delivery and/or pickup, surpassing Online ordering (from a computer) in the past year.
Through the Ipsos Foodservice Monitor (FSM), we have been observing this steady upward trajectory of the Digital Channel for the past four years and have called this out in several recent publications and projects. It is unprecedented to witness this pace of change in a relatively steady industry.
The question posed to individual operators at this juncture is whether they will remain observers or become active participants in the Digital Channel? It is understandable that Operators, who already face tight margins, encounter financial barriers when considering expansion into this new territory. However, the writing is clearly on the wall. It is no longer a wait and see approach, especially when Mobile Order traffic continues to grow (+130% in the past year) and the Digital Order channel now accounts for most pre-orders meal orders made for off-premise occasions ahead of time). To top it off, the size of digital pre-orders sales is now almost $5 billion annually.
After several years of expansion, FSM results indicate that Foodservice traffic growth has slowed to just over 2.5% in the past twelve months (to August 2018). Further, Restaurants Canada projects that foodservice dollar sales will slow to grow at an average of 4.4% per annum over the next five years. If there was ever a time for Operators and Suppliers to focus on a potential area of growth in the foodservice industry, now would be it.
With this clear evidence presented for the Digital Channel, Operators need to ensure they have ‘skin in the game’ to tap into current demand and to entice new customers. What they must consider though is whether they should utilize the service of Third-Party Aggregators such as Skip the Dishes (which sits atop the rankings in FSM) or to assume the responsibility for delivery themselves. There are pros and cons to each choice, but what is certain is that the space will continue to evolve. With one in five dinner occasions made on the spot/in the moment at home, convenience is increasingly important. Few things can be considered more convenient than ordering a prepared meal at the press of a button.
Beyond the financial appeal of a higher Average Eater Cheque (an incremental $2.15 for digital orders relative to the market average), there are several intangible benefits of developing a digital presence. This ranges from curating visuals and a narrative to build on brand equity, to interacting with customers and connecting with them. The obvious goal is to develop a strong dialogue with customers and eventually retain/obtain their loyalty. And lest we forget, the impact of over-development within younger cohorts and the legalization of Cannabis remains to be seen in this channel.
The upcoming FSM Digital Disruption report will provide further insights on how to leverage this unique area of growth and will arm users with a clear sense of how it is impacting the foodservice landscape.
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