Instant delivery business models have revolutionised the food and online grocery market. The instant delivery apps industry dawned in India with the arrival of global players like UberEats, FoodPanda, Domino’s, etc and expanded quickly thereafter. With companies wanting their share of the pie, many startups have turned to the instant delivery app model. Seizing the right time to launch the app, such companies have managed to thrive within the post-pandemic economy owing to their efficient business strategies and a huge customer base preferring convenient deliveries without having to step outside.
Instant Delivery Apps and their Business Models
For a company to prosper in the competitive market, it has to find the sweet spot weighing the nature of its product to the target audience. The instant delivery app has different business models based on the company’s requirements.
The Order Only Model is adopted by food delivery companies that act as the mediator between the restaurants present within a particular location radius and the customers. In this food delivery business model, the instant delivery app acts as the platform for restaurants to be visible to a greater audience, and for the users to choose from an array of options at their own convenience. After a customer has placed an order on the instant delivery app, the restaurant is notified and the order is confirmed thereafter. The order is delivered by the restaurant’s delivery boy to the user’s address.
This business model has its own perks and shortcomings. While the company can charge a direct commission fee from the restaurants for every order placed, the customer experience following the order allocation depends on the restaurant’s service quality. What this means is that failure to provide on-time delivery of food or other miscommunications can impact the user experience directed towards the company.
The Order and Delivery Model, as the name suggests, takes charge of the delivery process as well. This business model is more commonly adopted for the instant delivery app because of a number of reasons. One of the pros of Order and Delivery Model is that most restaurants would prefer to associate with this model of business as it liberates them from the delivery and customer handling responsibilities.
The company has full control of the delivery process and customer instructions. After the order is placed through the instant delivery app, a delivery boy nearest to the restaurant is assigned the task. The companies charge commissions from the restaurants and delivery fees from users depending on their location. Some of the challenges that come with this business plan are training the delivery partners, having more resources and managing multiple aspects simultaneously. Some popular food aggregator apps following this business model in India are Swiggy and Zomato.
The Aggregator business model is also used by companies that provide cabs instantly, like Uber and Ola. Pros of the Aggregate model for such companies are that their consumers can book a nearby cab or book bus seats in advance conveniently through their app. Their platforms are used to connect service providers with the users under one brand name.
In the Inventory business model, a warehouse is maintained wherein the products are procured and stored. In such a model the company is responsible for the curation and regulation of the inventory, dealing with customers and transportation or distribution. This model is often adopted by companies with a single product category, like milk or vegetables. However, the Inventory-based model is also employed by the e-grocery instant delivery app, since they use their own warehouses to store the multi-category of products and deliver them to the customers themselves. The online grocery market in India was valued at USD 2.9 billion in 2020 and is expected to grow massively in the coming years.
Among the existing competition within this blooming market, Zepto has had remarkable success owing to its Dark Store model. Before we move forward with Zepto and the Dark Store model, some other brands worth being mentioned for employing the Inventory business model are Swiggy Instamart, Blinkit (formerly Grofers), BigBasket, Dunzo and Amazon Fresh.
Zepto’s quick success came with their 10-minutes delivery plan. Zepto took the instant delivery app competition to another level, with super fast and convenient deliveries of groceries. Zepto did not only assume the Inventory business model but had to have dark stores to make this possible. Under the Dark Store model, micro warehouses are maintained for high-demanding localities which are not open to visitors. Having micro fulfilment centres solves the difficulty to cope with volumes to a large extent, as these dark stores can focus on the orders from their neighbourhood, function efficiently, and provide same-day, superfast deliveries or pickups. Other companies like Blinkit have also adopted the Dark Store model to keep up with the competition.
Why do so many Instant delivery startups fail?
While instant delivery apps have been blooming in the post-pandemic world, many startups fail to survive in this highly competitive marketplace. Many startups have to shut down owing to the operational costs. One of the reasons for failure is that the marketing plans that attract customers may not always attract restaurants. The rising demand for lesser delivery time within this competitive space can compromise the food quality. Substandard food quality for catering to the demand for on-time delivery of food in turn becomes counterproductive as it hampers customer experience.
Moreover, small startups often do not have the enormous investment for promoting their instant delivery app because setting up a business model alone requires huge resources. Zepto’s growth has been boosted because of its elaborate marketing promotions and campaigns featuring celebrities like Kailash Kher, Shankar Mahadevan and Usha Uthup. Startups also fail to provide competitive prices and discounts and thus fail to attract new customers or retain existing ones. An instant delivery app needs to have a user-friendly interface and should be smooth running for customers to keep browsing.
Collaborating with the best technology partner is crucial for companies because their instant delivery app is the platform that is responsible for the user experience. Another important part for e-grocery companies, in particular, is Inventory management. Regulation of the number of products, especially the ones with low-shelf life, and keeping track using automated systems can solve the issues that otherwise arise with large volumes. If companies fail to provide the desired delivery, mess up orders or do not meet customer complaints, it portrays the brand in a negative light and customers are less likely to re-order after an upsetting experience.
How does the integrated food delivery business model work?
In a Fully Integrated business model, the entire responsibility of preparing the food and delivering it to the customer is taken care of by the service provider. This model is usually adopted by popular restaurants like Dominos and Pizza Hut, which helps them boost their income and satisfy their customers at the convenience of their homes. While their instant delivery apps function similarly for order allocations, this model requires a massive investment as the entire task of food preparation and delivery is handled by the company.
This business model works for brands that have existing popularity in the market, have numerous outlets and have the investment to hire their own delivery men for every outlet. Why is the integrated model the most profitable food delivery business model? A fully integrated business plan is beneficial for such companies because they can evade any third-party involvement and thus avoid paying commissions for their orders. The companies have full control over their transactions in this model, and also over their delivery and customer management.
Benefits of instant delivery apps
The instant delivery app has proven to have various benefits in our digital world, especially in the food and e-grocery market. Some of these benefits are:
- Every successful meal and grocery delivery business owes its success to an instant delivery app. This would have not been the case if these businesses were restricted to websites only since mobile phone applications are used extensively and help create a recognisable brand’s individuality. Mobile applications allow companies to expand to a broader customer reach. Collaborating with the best technology partner for creating an on-demand instant delivery app also allows the company to reach the specified return on investment (ROI) on their business, as the app decreases manual work for employees and helps to increase the yield.
- Time is money! In a fast-paced world, the instant delivery app appeals to the customer’s need to have everything at the tip of their fingers. From browsing through a wide display of products, paying for the order, finding reviews, real-time tracking of their orders, etc, everything can be found within one app. Customers are not only paying for the products but also for convenience. The instant delivery app helps to improve distributions and facilitates faster deliveries to the customers.
- In the post-COVID world, contactless shopping has become an important factor, especially when it comes to essentials like grocery items and meals. Customers no longer have to visit the stores physically, as they can now order the required service through these apps. The companies can provide a contactless service following instructions provided by the customer on the app, like leaving on the doorstep.
- The instant delivery app also facilitates improved inventory control and better product assortment for the companies, especially for the dark store model.
- A fully functioning instant delivery app, coupled with a convincing business plan, can help a startup attract investors. Without an on-demand instant delivery app, investors might not be as interested because mobile dependency and customer behaviour patterns are well-established facts.
- Having an instant delivery app provides greater opportunities for the company and brings greater revenues. This can be extended to other kinds of businesses and genres with the right kind of business model and needed resources. Not long ago having groceries and food delivered, and cab or bus rides booked with one click on the phone seemed farfetched. Perhaps the future awaits more diverse businesses opting for instant delivery apps.
Conclusion
The instant delivery app has become a necessity for companies, both well-established ones and startups. It is vital to understand different factors surrounding a company’s niche, the competitors, target customers and available resources while choosing an appropriate business model for their instant delivery app. Although an instant delivery app is a big investment, the current online marketplace demands it of businesses in the era post the mobile phone revolution. The anticipated arrival of global players like Deliveroo will add to the existing competition in India.
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Image credit: Mobile delivery psd created by Kerfin7 – www.freepik.com