The State of Online Ordering for Restaurants

The state of online ordering

The stats for restaurant online ordering certainly aren’t slowing down, in fact, 86% of consumers are using off-premise services at least monthly and companies are finding new, unique ways to re-shape the food ordering process. Because of this, third-party food ordering companies and start-ups have emerged in recent years, fighting for their share of the substantial annual revenue being produced by the online ordering market.

This shift, while beneficial for customers and a crucial element in remaining competitive, forces restaurants to adopt effective online ordering methods, some of which come with their caveats. In this post, we explore the current state of online ordering and how restaurants can position themselves to thrive in an online ordering driven environment.

What Is Considered Online Ordering?

There are two main pillars of online ordering. The first is proprietary ordering in which a customer orders directly from the restaurant or eatery. This process ensures that the restaurant has complete control of the customer experience. The second is through third-party delivery companies. Third-party delivery companies are an outsourced food ordering and delivery system that charges restaurants and eateries for every order that goes through on their platform.

While third-party delivery companies certainly offer convenience for consumers, they charge significant commissions per transaction and can come with massive hits to margin, can result in loss of control over the customer experience, and offer no data sharing with the merchant among other challenges for restaurants.

Both offerings may have a few different experiences:

Web-based: Web-based ordering is the simple ordering process where a consumer visits a restaurant’s website and places their order directly through the site without having to call. Mirroring the traditional e-Commerce retail check-out experience, visitors can customize their order and pay for it online.

Native Mobile: The second method of online ordering is that offered by native mobile via an app. Users can download a mobile app that provides access to one, or multiple, food menus with the ability to place an order, offering a significantly better user experience.

Third-Party Sites: Third-party sites such as Facebook and Yelp now offer online ordering. These sites contain a multitude of listings for different restaurants, gaining revenue by selling ad spaces or premium features.

Online Food Ordering Revenue

According to Statista, online restaurant-to-consumer food ordering revenue is already over 1.6 billion dollars in 2019 and is expected to have an annual growth rate of 7.2% until 2023.

The average revenue per user is over two hundred dollars, and this will continue to rise as online restaurant-to-consumer ordering revenue increases over the next few years.

To put it in perspective, restaurants who don’t offer proprietary online food ordering are missing out on over a billion-dollar opportunity in an already competitive industry.

Benefits of Online Ordering

The number one benefit of online ordering is convenience. Customers easily view menu items, order their food, and provide payment. In an era where user-friendliness is key, a simple, streamlined ordering process if favorable for consumers.

Online ordering has the functionality to save the form of payment for faster checkout, store addresses for quick delivery, and even keep order history and preferences for efficient and easy selection. Not only can customers place orders and receive their food without leaving their house, but they can now do it with just a few clicks.

The breadth of online ordering benefits extends beyond the benefits sought by customers. Proprietary online ordering allows you to capture data to learn more about your customers and help you make smarter marketing decisions. For example, let’s say you discover that a large number of your customers order from a certain neighborhood. You can focus on creating marketing campaigns around that neighborhood, sending targeted emails offering rewards for trying a local store. This critical data enables you to offer special rewards for repeat customers, encourage advocate referrals, and get to know your customers and their preferences better so you can provide them relevant and personalized messages and offers based on that data. The marketing potential using data from online ordering is endless.

Another major benefit of proprietary online ordering for restaurants is exposure and brand awareness. Offering online ordering enables you to attract new customers and drive incremental revenue from their orders while maintaining complete control over the user experience. This allows you, for example, to separate first-timers from loyal customers, and then offer targeted incentives, as well as collect and respond to feedback based on that deep understanding of the customer.

Risks of Not Offering Online Ordering

Beyond the risk of not being a part of an incredibly lucrative market, not offering online ordering can have an impact on the overall operation of your restaurant. Without online ordering, staff can get tied up on the phone and at the counter. Orders taken over the phone may not be accurate, or information can easily be lost in communication. The result can be food waste and poor customer experiences that can be minimized by offering a positive online customer ordering experience.

Additionally, traditional in-store ordering processes aren’t ideal for customers. When customers come in, they can often feel pressure or anxiety, so they may order smaller sizes or not take the time to explore all the options. Online ordering creates a comfortable, familiar, convenient environment where customers can place their food order time and time again.

The entire in-store ordering process misses out on a lot of marketing opportunities. The inability to track customer spending information means that only customers who know about you will come. Using customer data to stay relevant is already becoming imperative in the competitive restaurant marketplace.

Third-Party Ordering and Delivery

The current consumer market for online ordering demands that restaurants participate in order to stay relevant in an increasingly competitive environment. This trend has allowed the emergence of third-party delivery systems to step in and relieve some of the pressure…but at a significant price.

If you’re a typical brick-and-mortar restaurant, your third-party delivery commission fees could eat up between 10-30% of each order. When it adds up, this causes real profitability issues for restaurants. That’s not the only risk of profitability loss. Because restaurants have no control over quality assurance or the customer experience after the food leaves the restaurant, any damage or issues sustained to the order during transport is the complete liability of the restaurant. Often, this results in having to offer replacements, refunds, freebies, or voided orders.

While a third-party ordering and delivery system does offer exposure and ROI, in most cases it’s more lucrative to offer proprietary online ordering. This is beneficial in that not only do you have complete control over the entire process from ordering to delivery, but your investment in marketing your own online ordering system goes back into your own pocket.

Wrap up

The current state of online ordering provides immense benefits for both the consumer and the restaurant. It turns ease and convenience for the customer into revenue and profit. Offering an online ordering experience is the difference between customers choosing to order from your restaurant or your competitors. That being said, third-party delivery systems are certainly enticing and offer a lot of benefits. Ultimately, first-party online ordering and third-party ordering and delivery will coexist as brick and mortars adopt a hybrid online ordering strategy. Sharpening your competitive edge, improving operations, and increasing your brand positioning means investing in an online ordering process that helps you get your share of an ever-increasing market.

To learn how Thanx can support your online ordering needs, request a quick demo.