The total addressable market (TAM) for online food delivery services was valued at USD 50.68 billion in 2021. It is estimated to reach USD 233.51 billion by 2030, growing at a CAGR of 18.5% during the forecast period (2022–2030).
Online food delivery is a service that lets people order food and drinks over the internet, either through a website or a mobile app. Customers can now see different preparations of their favorite foods in various cuisines, along with prices, thanks to the internet's increased accessibility. Platforms for online food delivery offer features such as convenient location delivery and on-time delivery options. These administrations observe an increase in their average population due to demanding work schedules and altering lifestyles. Transactions for online food delivery services and related services, which families primarily use, make up the market for these services.
All businesses that use packages from hotels are part of the market for online food delivery services. These businesses can do business online or through an app. The food may be ready-to-eat or require special preparation before being used immediately. Benefits offered by online delivery services include heavy discounts, rewards and cashback offers, doorstep delivery, and multiple payment options. Furthermore, providers of food services are setting up large warehouses to store fresh produce to offer high-quality food, encouraging the adoption of online delivery services.
Rising Internet and Smartphone Penetration
Enhanced network connectivity and an increase in the number of smartphones provide consumers with access to a range of different applications, including online food delivery services. Smartphones enable users to browse a list of restaurants and conveniently place orders with their preferred restaurants. Smartphones have reached the remotest of places, including rural areas, globally. The ease of access to e-commerce stores and food delivery applications offered by smartphones has contributed to the change in perceptions about online shopping among the rural population.
Furthermore, there has been a significant rise in mobile internet users globally in the past few years. The rapid development of network infrastructure has improved network connectivity across developing economies, thereby facilitating remote access to mobile applications. According to the GSM Association, more than 4 billion people globally had access to mobile internet in 2020, and this number is expected to rise to 5 billion by 2025. The advent of 5G technology, which offers higher browsing speeds, is also expected to enhance the online ordering experience, which is anticipated to open new avenues for market growth.
Emergence of Cloud Kitchens
The growing preference for online food ordering has led to the emergence of cloud kitchens. Cloud kitchens have low overhead costs compared to traditional restaurants, which enables them to reduce the service charges levied on the customers. Cloud kitchens can pay higher commissions to online delivery platforms because they have lower fixed costs. Cloud kitchens have low start-up costs and help cut costs like payroll taxes, service staff, furniture, utilities, and insurance. This makes them a good investment opportunity. Moreover, cloud kitchens allow owners to quickly expand their business across multiple locations with minimal upfront investment. Such benefits have led to the rise of cloud kitchens in the past few years.
Additionally, traditional restaurants are having difficulty competing with cloud kitchens because more and more people prefer to order food online and have it delivered. The number of people using cloud kitchens increased during the COVID-19 pandemic when many sit-down restaurants closed. Online food ordering is likely to become more common as the number of cloud kitchens increases quickly, which is suitable for the market's expansion.
Managing Large Delivery Volumes
The growing popularity of online food ordering has increased order volume, creating logistical challenges for food delivery companies. Several restaurants collaborate with online food delivery platforms to expand their business. However, restaurants receive an influx of orders each day from these platforms. So, it can be challenging for restaurants to keep track of a large number of orders across multiple platforms.
Many food orders can also result in improper food handling and misplaced orders, leading to wrong-order delivery and degradation in food and service quality. Managing logistics operations for fulfilling orders is another challenge facing online service delivery platforms. Delays in order delivery can degrade food quality, leaving customers dissatisfied with the food delivery service and harming the market.
The advent of user-friendly applications and tech-enabled driver networks is expected to contribute to market growth. Integrating key technologies such as machine learning and artificial intelligence is helping enhance the online food ordering experience for customers. These technologies allow adding various features, such as chatbots, order tracking, food and restaurant recommendations, and voice commands, to online food delivery applications. These features improve client relations and increase revenue by providing users with a customized food ordering experience.
Over the past few years, food companies have focused on implementing technologies such as food delivery robots and drones to enhance delivery speeds and timings. In 2016, Domino’s Pizza partnered with Flirtey and successfully delivered two pizzas in Whangaparaoa, New Zealand. Similar to drone delivery, autonomous delivery robots are expected to be used for delivering food items soon. For instance, Postmates, Inc., a food delivery company based in California, U.S., used delivery robots to help deliver food in Los Angeles since the beginning of the COVID-19 pandemic.
Additionally, several companies are investing in developing online food ordering applications for sellers and consumers. For instance, Cuboh Software Incorporated introduced an application that consolidates orders from different food delivery platforms and enables food delivery companies to view and manage orders on a single application. This application is expected to help food delivery companies automate and streamline orders and minimize preparation and delivery timings. Implementing such technologies is expected to enhance food delivery timings and ensure quality food delivery and customer satisfaction, which is anticipated to contribute to market growth.
The global online food delivery services market is segmented by type, channel type, and payment method.
By type, the global online food delivery services market is divided into restaurant-to-consumer and platform-to-consumer.
The platform-to-consumer segment is the highest contributor to the market and is anticipated to grow at a CAGR of 19.9% over the forecast period. In the platform-to-consumer model, food delivery apps list restaurants close to the customer, usually done through a website or an app. This model mainly comprises online delivery services that send customers meals from partner cloud kitchens or restaurants that do not deliver food. The platform-to-consumer segment is expected to grow primarily in capital cities due to an increase in the number of investments in this model.
In the restaurant-to-consumer model type, restaurants offer food deliveries directly through their website or application or join online food delivery platforms. For instance, the food company McDonald's operates its online food delivery network in certain countries through its website or application. The company also collaborated with local food delivery companies like DoorDash to deliver food to regions, areas, and places they do not serve.
By channel type, the global online food delivery services market is divided into websites/desktop and mobile applications type.
The mobile application segment owns the highest market share and is anticipated to grow at a CAGR of 19.9% over the forecast period. The market is anticipated to grow fastest during the forecast period, maintaining its top spot. This fast growth is because more and more people are getting smartphones and technology is getting better, like with 3G and 4G networks. In addition, many restaurants offer discounts to end-users ordering food via mobile applications.
The growth of the websites/desktop segment can be attributed to the increasing number of restaurants that are endeavoring to increase foot traffic by expanding their online presence through websites. The growth of the e-commerce sector further fuels the adoption of website/desktop channels for ordering food online. Moreover, integrating AI/VR in desktops/laptops will propel the segment's growth.
By payment method, the global online food delivery services market is divided into cash on delivery and online.
The online payment segment is the highest contributor to the market and is anticipated to grow at a CAGR of 19.9% over the forecast period. Online payment services include payments through payment portals, net banking, or credit/debit cards. A wallet option is also available to assist users in paying for their orders. A wallet also aids with promotions and offers by increasing app engagement. People are more likely to use online payments due to increased digital currency knowledge and collaboration between banks and online food delivery services.
The COD (Cash on Delivery) segment is expected to grow rapidly over the forecast period. This growth can be explained by the fact that some customers prefer to pay in cash because they don't trust online payments to be safe. However, banks are putting more effort into enhancing security and providing users with more services, which will probably cause a change in the situation over the next few years. Also, cash-on-delivery is the most popular way to pay in many developing economies, like India and Sub-Saharan Africa.
Asia-Pacific Dominates the Global Market
By region, the global online food delivery services market is divided into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
Asia-Pacific is the most significant shareholder in the global online food delivery services market and is anticipated to grow at a CAGR of 19.80% during the forecast period. The region is expanding due to changing millennial tastes and rising average personal incomes. The local market's growth is also helped by the fact that millennials are using their smartphones with internet connections more and are quickly adopting new technologies like voice-assistant apps. The growth of e-commerce in developing countries like India and Japan is also making it easier for people in the region to use food delivery apps.
North America is expected to grow at a CAGR of 18.3% during the forecast period. The increasing popularity of fast food in the region can be attributed to the changing preferences of the population. Due to their busy schedules and evolving lifestyles, people have started having their meals delivered to their homes or places of employment in the past ten years rather than waiting in restaurants. This is expected to open up new prospects in the online meal-ordering market. Several online food delivery services, like Postmates Inc. and Just Eat Holding Limited, are also helping the regional market growth. Industry players in the region offer live customer service, delivery execution, and other related services, which will help the region grow.
Europe is expected to grow significantly over the forecast period. The millennial generation is the target market for online food delivery services because of their fast-paced lifestyles in Europe. Compared to previous generations, they frequently spend more of their income on prepared food. Online food ordering is becoming increasingly appealing to consumers due to their increased purchasing power and evolving lifestyles. The online food delivery industry is much more significant in France, Italy, and the UK than in Spain. Two important players in the online food delivery market are the UK-based platforms Deliveroo and Just Eat. Both provide an online platform for placing home delivery orders for meals, acting as a middleman between customers and restaurants. For instance, Just Eat processes over 100 million orders in the UK each year, which is its largest market.
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