Digital Commerce: Delivering Disruption

E-commerce is affecting more than CPG sales—it’s changing the face of foodservice
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Taking It Out of House

While Postmates and other delivery services have been popping up spottily in big cities for a while, the buy-in of national brands such as Starbucks and Taco Bell is a potential game changer. Food takeout and delivery is a growing segment, one estimated by New York-based research firm BI Intelligence to be a $70-billion-a-year business in the United States. Chipotle is testing its delivery program with Postmates, and Starbucks is testing two models: one with Postmates and one with its own team of barista-runners called Green Apron.

The third-party concept opens the delivery opportunity to more operators. “Delivery requires a lot of management,” Daniel Holzman, co-owner of six-unit chain The Meatball Shop in New York, recently told CBS News. “There’s a lot of liability involved. You know, to think that an employee of mine is out there in the streets of New York City … it’s scary.” So having a third party handle delivery, he said, is a “no-brainer.”

That’s the attraction for restaurants. In the 22 markets in which it operates, Postmates—which has been calling itself “the Uber for stuff”—hires independent couriers for delivery. When consumers place orders through the Postmates app, they input their credit-card information, after which a nearby courier can accept the request. The courier will then call the order in to the store or restaurant, pick it up and deliver it, all for a fee to the consumer.

But Postmates has recently seen fierce competition from a number of other third-party services. Both startups and large companies, including the actual Uber, are promising fast, consistent food delivery and a wider reach than operators delivering for themselves. (See chart below for up-and-coming players.) The latest competitor: digital coupon service Groupon. Following its recent acquisition of food-delivery startup OrderUp, the company made its first foray into on-demand food delivery, Groupon to Go, in July.

Groupon to Go’s differentiator reflects its core competence: discounts. Groupon, which has been testing the delivery service in Chicago since March, offers customers the ability to save 10% or more in the form of instant cash back when they place an order using the platform.

“Most people get delivery and takeout multiple times a month, and with Groupon to Go, we’re giving them an easy way to save money every time they do so,” said Sean Smyth, vice president and general manager of Groupon to Go, in a statement released by the company.

While Groupon’s food-delivery service is available solely in Chicago, it will expand to markets including Austin and Boston later this year.