7 Common Reasons For Facing Failure In On Demand Food Delivery Business
Uberization or even platformization of the economy affects many fields of activity. Thus, personal services are not spared by this phenomenon which disrupts traditional economic models. Do the companies that choose this strategy for their development manage to survive for a long time? This is a question that makes perfect sense when you consider that the food delivery at home can go bankrupt.
The aim of this article is to answer this question by showing the causes of the failure of the on demand food delivery business and its consequences on the uberization of personal services.
The various problems in on demand food delivery business
There can be many issues that can lead to the failure of the food delivery market.
1. The use of self-employed workers
The determining cause of home delivery failure like companies such as TaskRabbit and Uber which are very well known in the on-demand delivery industry is that the restaurants work with freelance workers in their home food delivery business. The latter did not have the status of employees despite the long working hours.
With a simple status of auto-entrepreneurs, the household helpers responsible for intervening with the various clients certainly benefit from an attractive remuneration but with fewer social benefits in terms of social protection and many others. Moreover, the stability of their employment was not guaranteed by the system put in place by the restaurants.
They become unable to benefit from reimbursements and overtime payments due to their status as self-employed workers. Unhappy with this gloomy situation, the independent delivery personnel will take various legal actions against restaurants. The objective of these complaints was to demand reclassification in order to obtain employee status.
2. Financial results below expectations
In terms of profitability, many restaurants have not really been very good in food delivery app development. As proof, the restaurant has suffered high and growing losses.
An analysis of the home delivery company’s financial statements found that its services are used by only a quarter of customers in the first month. In addition, less than 10% of customers renew their contract with the company after 6 months of use. This means that the churn rate remains particularly high at this uberized firm.
3. Difficulties in retaining customers
In addition to the huge losses they suffered, the restaurant owners struggle to retain its customers. However, the policy put in place to find clients was costly. This was not always compensated by the high rate of unsubscribe. In this regard, these restaurants don’t spend a lot of money to acquire their clients, but without really being able to retain them.
In 2014 to attract new customers and set up in new cities, the restaurants offered relatively low prices compared to standard market prices. All these marketing actions aimed at stimulating growth did not have the desired effect insofar as they did not.
4. Blame it on a poorly put together internalization policy
Already present in many global metropolises such as New York, Berlin and London the home food delivery looks for an ambition to conquer new markets. The restaurant owners don’t invest significant sums in strategies that should enable it to have customers in more cities across the planet.
In order to carry out its various activities over a larger geographical area, the restaurant will not only spend a lot of money in the campaigns but also in the very low prices that it offers to its new customers. Some restaurants have really lacked tact in its internalization policy. The home food delivery business modeled on Uber was carrying out large-scale but disorderly actions.
5. The quality of services questioned by a large part of the clientele
While it offered some of the most attractive prices on the market, some restaurants did not always provide quality services. Yet no shortage of efforts was made to provide customers with impeccable delivery service.
In order to obtain a higher customer retention rate, many operations have been carried out. They can cite in particular the strengthening of advertising on social networks such as Facebook or the publication of ads on good business sites such as Groupon
6. Recurring technical problems
The frequent technical problems constitute the other facet of the poor quality of the services offered by some restaurants to its customers. Failures at the company site were recurrent. This is the cause of many inconveniences such as the difficulty in finding a door to door delivery provider and much more such as the delay in carrying out the various delivery jobs.
This situation has led to the deterioration of the company’s image with its customers. The high unsubscribe rate after the first six months is one of the consequences of these technical difficulties often encountered by failed restaurants.
7. Massive departure of the best employees
One of food delivery business’s biggest problems, which may have precipitated its demise from the personal services market, is the massive flight of top workers. In fact, drivers who were not linked to the company by an employment contract could leave it at any time to go and create their own structure.
The real concern was not the departure of the best people. When they left, they picked up the customers. This inability to retain its top performing workers was very fatal to home delivery. It recorded significant losses due to numerous unsubscribes. This phenomenon of worker flight also had negative consequences on the quality of service offered to customers. The lack of control over these agents’ intervention can be justified by the status of the latter.