Adapting to these changes, food suppliers, food retailers and food markets the world over are hastening to transform their operations while anticipating further and more radical changes to come.
In what follows, I will be looking at just how the new Food Delivery Platforms are disrupting and transforming much more than the sections of markets they were launched into. Beginning with a survey of the better known effects of their arrival, I will then outline some of the key technologies that have made them possible. This should help us understand how food delivery platforms are evolving, the changes they are provoking and the future systems that may replace them. Importantly, seeing food delivery platforms as systems will help us map and describe the vast impact their arrival and development is having on food markets and food retail across the globe.
The Arrival of Platforms
A platform is a business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure for these interactions and sets governance conditions for them. The platform’s purpose is to consummate matches among users and facilitate the exchange of goods, services, or some sort of social currency, thus enabling meaningful value exchanges between all participants....
- Geoffrey Parker, Professor of Engineering at Dartmouth College
Facebook, PayPal, Alibaba, Uber, are all companies that disrupted their markets when they arrived and they are all platform businesses. Platform businesses, as indicated in the quote above, are based on a business model that creates value by facilitating exchanges between two or more interdependent groups (consumers and producers). The ‘disruptive’ nature of these businesses stems both from what is exchanged and the way in which it is exchanged.
By creating an offer that is simpler to use, cheaper to own and operate and thoroughly ‘modern’ and by launching this offer into existing markets, innovative businesses disrupt and in some instances completely transform markets. When the offer achieves its uniqueness by facilitating an exchange between two parties (consumers and producers) who formerly had no means of direct exchange, a new and often ‘disruptive’ market is created, one that often displaces previously accepted norms, thereby altering consumer expectations, sometimes for good.
It is important to note that platform businesses are disruptive both through the creation of new products or services and through the creation of new markets or modes of exchange. In some ways, platform based businesses simply replicate the functionality of markets but with a key difference. The offers and services provided are generally only possible because a new, digitally enabled market has been created to facilitate the exchange. Uber, for instance, have been able to disrupt the taxi and minicab market because its platform allows users to bypass the established market, ie., the network of minicabs, taxis and private hire vehicles, etc. They do this by acting as a broker for drivers and for individuals needing transport through the ‘participative structure’ they provide. They act, effectively, in the role of a middleman. They simply provide the systems and support that make the exchange possible.
Privatizing the Market
Ironically, the real ‘strength’ of the platform business model stems from its quiet ‘privatization’ of long, established markets. Driven by advances made in peer to peer networking technologies that were originally conceived to enable direct exchange between individuals, these same platform-based businesses (Uber, Deliveroo, Just Eat) are now using this core technology to create extremely large, middle systems and immense data silos. Importantly, because these same systems were constructed with peer to peer capability in mind, a technology that has yet to fully emerge, there are many who now believe that the next phase of innovation in this area will lead to re-enabling peer to peer or consumer to consumer exchange. This kind of innovation could have profound implications for behemoths like Uber, whose core business is built on acting in the role of middleman or ‘linchpin’. Imagine, for instance, what a true peer to peer Food Delivery Service model would look like, one that required no agent to act as a ‘linchpin’. How would it function? To whose benefit? Soon, we may well see prototypes of these systems emerge. If they do, they may well threaten the dominance of those who have secured powerful positions in the ‘privatization’ of the food service delivery market.
Food Delivery Platforms
As mentioned, Just Eat, Deliveroo, Foodora and Grubhub are also platforms that use technology that match producers and consumers. They have also been highly disruptive to the food supply and food retail markets that they launched into. Following in the footsteps of other disruptive logistic based systems, food delivery platforms focus on enabling direct exchanges between producers and consumers by widening the delivery capabilities of producers. This is achieved by interlinking an aggregation tool which allows restaurants to advertise their products for delivery with a delivery system that provides a fully managed delivery service. Restaurants and Food Retail companies can easily register with the delivery providers, list their products for delivery and almost immediately, begin to see a benefit as their delivery orders increase substantially. As the delivery service is often a fully managed service, they do not even need to recruit drivers. For restaurants and food retail outlets that have lacked delivery capability, these platforms can provide significant benefits. For consumers wanting the convenience of freshly cooked and ready to eat meals delivered directly to their homes, the benefit is clear.
Nevertheless, just as in the case of Uber, the introduction of the Delivery Service Platform model is also proving highly contentious as many of the long-term consequences of this disruption become clear. What are these consequences and do they pose as great a concern as some claim?
Excess Charges
One of the most talked-about issues is the amount charged by Delivery Service Providers. It is not uncommon to see charges ranging from 17% - 25% being applied for every item delivered. This is high by any standard and, many argue, unsustainable in the longterm. Although Restaurants and Food Retail Outlets are initially keen to agree these terms, many will not have anticipated what this means for their overall financial strategy. Often finding that their delivery orders surge ahead of dine-in orders, they will inevitably take steps to prioritize their new found revenue channel. This can be a big mistake and often leads to workflow issues, incorrect resource allocation and difficulty with overall planning. Observing this first hand, Delivery Providers are now encouraging restaurants to adapt their core operations to suit. For instance, where delivery revenue is very high, ie, above 50% of overall revenue, restaurants are being encouraged to set up delivery-only style operations. Several of the larger delivery providers, ie, Deliveroo, Just Eat, Foodora, have gone one step further and are setting up what are referred to as ‘dark kitchens’,ie, production facilities that are leased back to restaurants for delivery-only production. Whether or not this radical change of operation is beneficial to the restaurants or the larger food retail market itself is another question and one which we will look at in detail in the future. What is clear is that the business model Delivery Providers pursue not only has a direct impact on the larger food retail market itself but increasingly requires radical changes to how restaurants operate and, in some instances, seeks to overturn the distinction between delivery provider and food retailer. Delivery Providers that host restaurant operators in what are now referred to as 'Dark Kitchens' are only a step away from being fully fledged Food Retailers. Some see this as worrying trend and one which may lead to the further dominance of large food retail companies and a monopolization of the market.
Loss of Customer Data
Interestingly, although excess charges are certainly a problem for restaurants and for food retail outlets, there are several more significant issues. Chief of these is the loss of ‘ownership’ or management of customers information. Prior to the setting up of a contract with a Delivery Service Provider, restaurants would have had sole access to their clients contact and order details. When Delivery Service Providers enter the scene, this is no longer the case. In most instances, restaurants lose complete access to this information. This has a considerable impact on their operations. No longer able to communicate directly with their customers and reliant on the Delivery Service Provider for the management of this data, they find themselves bound to service agreements they might otherwise relinquish. More importantly, they will not have full sight of service-related data. Any issues such as quality or service related complaints, should they arise, will be difficult if not impossible to address. They will simply not have the relevant information to address these. Importantly, even if they were provided with this information, they would struggle to follow up with their customers because the information that is provided is piecemeal and unlinked to their own information systems.
Operations Disruption
When a restaurant opens up its operations to food delivery, management often finds that a new approach to work flow is needed. Should the take up of delivery be significant, a full reworking of restaurant design might be required.
Operations disruption generally happens in three areas: Inventory & Production, Food Holding and Delivery Collection
Inventory & Production
It is well known that most restaurants in the UK, with the exception of some of the larger chains, have either very limited or no systems at all for managing their inventory and food production processes. The lack of real-time information on stock levels and production levels will make it very difficult to adjust to the fairly unpredictable nature of delivery demand. Additionally, unless there are separate work-flows for eat-in, take-away and collect orders, prioritizing correctly can prove challenging. With many restaurants in urban centers garnering more than a third of their sales from delivery, the adjustments required are not insignificant.
The lack of aligned inventory, production and delivery systems causes further difficulty when workflow, kitchen space and finished product holding area have not been adapted to meet the new delivery demand. When there is no attempt to segregate the production and of eat-in from take-away or delivered product, decisions about which order to prioritize are problematic. Such situations can quickly become chaotic with the real possibility of reputational damage.
Food Holding
It is especially important for Restaurants to be fully aware of the health & safety and legal requirements when introducing changes to their production and holding processes for made-to-eat product bound for delivery. Food is a complex business and dangers arise when this is not sufficiently acknowledged. With nearly 80% of all delivered food product being hot food, particular attention needs to be given to this category where the majority of risks arise. In restaurant operations, the urgent need for operationally advanced, efficient and ergonomically designed Hot Holding Cabinets (referred to in the industry as hot-holding) is clear to those staff managing food delivery services. If the temperature of the food product is not maintained correctly, serious health risks can result. Also, unless the food product is packaged correctly, its quality and integrity can be easily compromised.
Equally important, for safe food-holding practice to work, accurate and relevant information on the food item must be available. This will include information on when, where and how the product was made. A full list of ingredients is essential along with accurate temperature tracking data. If it is not known when a particular food product was made or at what temperature it was held at, significant health and safety risk necessarily follows. Currently, the level of risk to the public's health and safety for food delivered product in the UK remains very high and it is surprising if not alarming to find so little comment on this by the regulatory framework (FSA, DEFRA, etc) in the UK.
Delivery Collection
Without access to relevant information on the nature of the product being delivered, both food producers and food consumers are confronted with unacceptable levels of risk. Interestingly, during the last stage of delivery (when the product is handed to the consumer) the liability for the 'nature' of the product, continues to rest with the food producer. This ought to indicate a problem, for how, one might ask, can the producer be fully responsible for the product when they no longer have control over how or when it is being transported? The way in which a food item is transported is fundamental to its safety. A breach in the packaging, a change of delivery time or a change in temperature can quickly lead to an unsafe food product. There are of course other risks, such as the wrong product being delivered or a product being tampered with. How would you know, for instance, if you've received a slight variation to the product you ordered. Perhaps it contains an allergen that you would not welcome. Correct labeling and traceability are essential for the safe management of food production and food delivery, yet the current systems that Food Delivery Providers use are neither robust nor nuanced enough to allow for either.
Viewing Food Delivery Platforms as Systems
A system is a configuration of interaction, interdependent parts that are connected through a web of relationships, forming a whole that is greater than the sum of its parts.....
Just how we conceive of this platform-driven revolution in the supply and management of food is fundamental as it will determine how well or how poorly we understand the larger changes taking place. Showing all the hallmarks of what is known as a ‘system change’, we are well advised to look carefully at its connections and interdependencies. For instance, with technological innovation driving the development and enhancement of food delivery systems (the introduction of traceability, temperature monitoring, authenticity tagging, etc), we may also find that related and dependent systems, such as logistics, are suddenly open to new capabilities. An example of this is the benefit achieved when food management systems are interlinked with food delivery systems. With this interlinking, the breadth of useful information that can be garnered for the benefit of consumers is considerable. Giving consumers access to this information (true shelf-life, full traceability at item level, authenticity guarantee, etc) through easily interpretable systems, provides them with real choice and allows them to make truly informed decisions. This level of innovation, which is happening simultaneously across a number of the sub-systems of the larger food supply and food retail system (food production, food packaging, food transportation) offers vast and as yet unrealized benefits for business and consumers alike. What this also shows is that changes, transformations and revolutions in systems can and often do start in the smaller sub-systems of the larger system itself. Interestingly, there is now quite a bit of evidence to suggest that the rapid profusion of innovation across food supply and food retail systems has been sparked by technologically driven innovation in the food delivery sector.
Change of Paradigm - Navigating the Road Ahead
Why do well-managed companies fail? They fail because the very management processes that have allowed them to become industry leaders also make it extremely difficult for them to develop the disruptive technologies that ultimately steal away their markets.....
- Clayton Christensen, The Innovators Dilemma 1997
We must also however sound a cautionary note. Systems changes, sometimes referred to as a ‘change of paradigm’, can have unforeseen consequences which are difficult to anticipate if not respond to. Perhaps one of the most neglected aspects of the systems change in food production, distribution and consumption that we are witnessing, concerns the change to the market itself. With food delivery platforms having ‘disrupted’ the standard operations of food retail and now set to transform larger sections of the food supply system, many businesses are simply unable to devise appropriate strategies. This is because their operational model is inherently tied to the old market, i.e., they lack the ability to change, adapt or resist. For instance, a restaurant located on an urban high street that chooses not to engage with the larger Delivery Service Providers, may simply find that it slowly begins to loose trade as consumers move away from dine-in and choose delivery instead. This pattern of disruption has happened before. One only has to recall the destruction of the bookstore market brought by the online giant Amazon. Unfortunately, this type of business failure is no longer uncommon. Food delivery is in many ways a revolution within a revolution with far-reaching consequences for the larger food system itself and with the rise of smart technologies, consumers are flocking to markets that offer convenience and transparency. It is only a matter of time before this same expectation (convenience, transparency) is required of all food related services.
Smartphone Technology - Is Efficiency All?
The widespread adoption of smartphones has been key to the growth of this industry and it would not have been possible without it. While it is a mere step change from phone based ordering to computer based ordering, the ability to place orders on a small device that travels with you and that also acts as a mobile ledger (order info, production stage, delivery driver location, product temperature, etc) is a change of a different magnitude altogether. When you add to this the capability that will allow consumers to track, understand and manage their dietary habits, we begin to see how powerful and consumer oriented the food management systems of the future will be. With the form and capability of smartphones set to change radically in the near future, it is very likely that these ‘intelligent devices’ will provide ‘ease of use channels’ that will further enhance both the mobility of food and our knowledge of it. The mobility of food will also be greatly increased and supported through the dramatic and irreversible changes to our transportation systems which are now inevitable. With the abandonment of the private ownership model of transport, we may see widespread adoption of delivery systems that could provide extraordinary benefits through the efficient provision of food, vast reduction in the amount of energy used and elimination of food waste, amongst others. The mobility of information is revolutionizing the way we understand, purchase and consume food with food becoming truly mobile.
The Sharing Economy and Collaborative Consumption
Having grown out of the open-source community, the use of peer-to-peer based technology for the sharing of goods and services, led early on to the creation of online spaces or ‘marketplaces’ where collaboration and mutual interest challenged the old models of blind-agent markets. Originally conceived in terms of agent*agent exchange, this was quickly adapted and remodelled as Business*(agent/agent) exchange. These have now been recast as open platforms that aim to achieve ‘mutualization of benefit’ and ‘optimization of resource’. While these systems remain relatively immature, the original and radical ideas behind their creation continue to influence their future development. Currently designed and operated primarily for the benefit of large investors and hedge-fund finance, most if not all of these online marketplaces (AirBnB, Uber, TaskRabbit, Deliveroo, Just Eat, etc) have incorporated elements of the ‘sharing’ model into their operational processes and marketing. That these services are seen to benefit the public as a whole, is absolutely essential to their operational legitimacy. Equally important for both operational and marketing purposes is the functional need for these systems to address and counter the prevalence of reduplication, excess, waste and hyperconsumption. It could be argued that should these companies fulfill their current mandates, they would indeed achieve just this. As of now, the verdict remains out on their benefit as many if not all of the example companies mentioned, have stalled in their development programs and appear content to pursue a winner takes all strategy. This is unfortunate but not unforeseen with a number of start-ups standing in the wings with fresh ideas and strategies that clearly mimic if not adhere to the logic and aspirations of social innovation. Entrepreneurs in the open source community are beginning to imagine, for instance, what a collaborative platform for food delivery services might look like where all participants, buyers and sellers, have open and secure access to the products and services made available. Open delivery platforms, drawing inspiration from the many collaborative consumption models used in online marketplaces like eBay, are also incorporating lessons learned from social lending and peer-to-peer services, bringing into the heart of these platforms, new forms of ‘collaborative capital’. Innovation in open platform models of this type is just beginning and will have considerable impact on the future of food.
Social Networks and Transparency
Social networks take up an increasing amount of our time online. It therefore comes as no surprise that Facebook users can now order food to be delivered to their homes without ever leaving Facebook. Social Networks, like Facebook, have been preparing for this eventuality for some time through the enlargement of their platform’s capability and through the hybrid forms of community that they generate.
The declared intention of Facebook to be the ‘community to which you always return’ makes it very clear that their operational goal is to meld the worlds marketplace and all types of community, whether they be family, friends or groups of interest. The resultant data generated by the various forms of exchange becomes both the focus of advertisement and the basis for future active 'communities' of business and capital growth. For some analysts, this is literally ‘a tricky business’, as the incorporation of business exchange into the heart of what purports to be a social network or ‘community’, draws attention to the elephant in the room, i.e., facebook is truly a marketplace whose functionality is legitimated through the networking of family and friends, etc. As recent events have clearly shown, Facebook's pursuit of a 'free' platform, has never been free from the need to profile and profit from its 'collaborators'. By opening the platform further to the purchase and exchange of product, ie., food delivery product, they may well have endangered the 'elephant in the room'.
The Future of Food Delivery Services
Food Delivery Systems are here to stay and their role in our everyday lives will only increase. What does the consumer want in relation to Food Delivery Services? They surely want to know that the food product they've ordered is fresh, safe and good. What kind of a food management system is needed? What kind of food delivery system would this require? Much of the innovation, as before, will be technologically driven. Some of the changes we are likely to see, include the following:
Food Delivery Provider Vetting Systems - All Food Service Delivery Providers will require certification against a Standard in order to secure a License to Operate
Restaurant Vetting Systems - Restaurants wishing to provide delivered food product will require certification against a Standard in order to secure a License
Consumer Information Apps - Transparent management of information on food products (answering the questions: where, when, what, how,)
Integrated Food Management Systems - (Inventory, Production, Logistics, Sales, etc) - Full Traceability Systems with immediate recallability
Restaurant Design Innovation - The combination of Rapid Heating/Cooking Technology, Hot Holding Cabinets and New Traceability Systems
Safe Packaging - Fully Recyclable, Safe and Fully Traceable Packaging Systems (tamper-proof packaging)
Quality Assurance Providers - Consumers will choose delivered product on the basis of an assurance mark for delivered product
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