- Research shows that ordering food for delivery has gotten expensive, yet demand remains high.
- Pandemic habits and time-saving needs drive consumers to prioritize convenience.
- This means that they are more willing to foot the bill for delivery.
Convenience comes up with a pretty hefty cost these days.
There's now a considerable difference in spending between eating out and getting your meal delivered. But demand for food delivery has remained high — as has its price.
The personal finance site FinanceBuzz did an experiment in September and found that based on the cost to deliver an entrée, a side, and a drink from 10 popular chains on the same day within 3 miles — organizing dinner with an app such as DoorDash, Grubhub, UberEats or Postmates can cost almost double what it would to collect it yourself. This is when factoring in charges for food, fees, taxes, and suggested tips.
Business Insider contacted these delivery companies for comment. Both Uber — which owns UberEats and Postmates — and Grubhub pointed out that restaurants also often set the menu prices for delivery, and these may sometimes be higher than when purchasing in-store.
Still, diners aren't necessarily being deterred by the much higher prices.
Last week, food delivery company DoorDash, reported an 18% rise in orders year over year in its third quarter of 2024. Revenue grew 25% to $2.7 billion in the same period.
While Uber doesn't split out the results of its individual delivery companies, it saw gross bookings for its delivery segment grow by 16% year on year in Q3.
So, why has delivery gotten this expensive?
Consumer competition
"As app delivery has become more popular, apps have to pay more to drivers to convince them to make deliveries for their team — with many drivers juggling multiple apps throughout their shifts," Anthony Miyazaki, a professor of marketing at Florida International University, told Business Insider.
"At the same time, demand for delivery pushed consumers to unknowingly compete against each other, with a willingness to pay more for delivery and more for tips to get their food delivered on time," he said. A food delivery driver previously told BI that he decides to accept or pass on a variety of deliveries often based on the highest upfront tips.
This led delivery app companies to take a higher cut from restaurants and raise fees for customers, while at the same time, drivers are looking for higher tips, Miyazaki explained, which all results in a much pricier food order.
Matched with inflation resulting in the soaring prices of labor and commodities, many chains — including Starbucks, McDonald's, KFC, In-N-Out, and Olive Garden — have increased the cost of menu items.
There are a couple of reasons that, despite the hikes, Americans are still choosing the ease of using an app to get dinner.
Creatures of habit
The way we dined changed following the COVID-19 pandemic.
But despite lockdowns coming to an end and the country gradually opening back up, people grew accustomed to the trend of ordering food.
"The pandemic has shifted dining habits, leading more consumers to seek out restaurant-quality meals at home," Alon Chen, CEO of Tastewise, a consumer data platform for food and beverage brands, said.
"Consumers now consider ordering takeout as a time-saving experience akin to dining out but in the coziness of one's living room," he said.
For Miyazaki, because of the rise of streaming, more are comfortable with 'entertaining in' rather than going out for a meal.
"Also, with more people working from home, they're likely further from lunchtime restaurants and don't feel the need to get away from the office anymore for their lunch break," he said.
Time is money
Oliver Wright, a senior managing director and the global lead for consumer goods and services at Accenture, explained that consumers feel "time-poor."
This means that although more money is spent on ordering food than cooking or eating in a restaurant, the customer is saving time, he told BI.
The degree to which convenience and ease are playing on consumers' minds to alleviate time pressure has become especially relevant in recent years, Wright said, to the extent that people are willing to spend more if time is saved.
"Feeling 'time-poor' is a really dominant attribute," he said.
"The value of time might be very high," Chris Olivola, an associate professor of marketing at Tepper School of Business, told BI.
He said that for the rational consumer, whether because of the amount of money earned per hour, how much importance is given to an activity, or the contribution being made to a company, these food delivery apps are popular because of how they assess their time.
It's also about expertise, he said.
"You might be a good cook, but if you want Thai food and you don't know how to cook Thai, you have to teach yourself, Olivola said, "and that takes time."