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The latest figures from global information company, the NPD Group, state that over the past decade, the takeaway and delivery market here in the UK has grown from £2.4bn to a huge channel worth £4.2bn - an enormous 75% increase. NPD also estimates this sector will grow a further 17% in value over the next two years to be worth as much as £5bn.

If hospitality operators don’t have a delivery partner and can’t seduce consumers out of their homes, what innovative steps and trends should they be capitalising on to drive additional revenue, whilst bridging the gap on this ever-growing channel?

Here Philipp Laqué, Managing Director of Revenue Management Solutions (RMS), takes a look at the latest trends and innovations in at-home dining that operators should be looking to adopt. He also talks to Jackie Berg, VP Marketing for US-based Olo, the ground-breaking online digital ordering and delivery specialists, who operate with 250 US hospitality brands across 50,000 locations in North America. Jackie will be providing her top tips to getting delivery right for UK operators.

The astonishing rise in demand for home meal-kits for time-poor customers & budding chefs
According to Hexa Research, the global meal-kit delivery service market was worth around US$2.5bn in 2017 and is expected to reach $8.94bn by 2025. HelloFresh, which was founded in 2011, delivers boxes with recipe cards and ingredients for Instagram-worthy home-cooked meals. The business listed on the Frankfurt stock exchange in 2017 and has more than 2 million customers in 11 countries, including Germany, the UK and the US. It delivered nearly 200m meal-kits in 2018, up 44%, and made revenues of €1.3bn, up 41%.

In comparison, HelloFresh’s main rival, Gousto, which was founded in 2012, announced at the start of the year that it had raised £18m in equity funding to continue development of its customer-facing AI recipe recommendation tool, through which half of customer orders are now placed. It also plans to prioritise the majority of its investment in technology to accelerate growth. The company claims it now delivers over 1.5 million meals monthly in the UK and is seeing 170% year-on-year growth.

The theory behind the concept of home meal-kits is indeed sound. Consumers today are time-poor, and are becoming more health-conscious, so put a premium on convenience and operators can instantly see the appeal of quality ingredients and recipes being delivered to their door.

However, critics believe the meal-kit companies’ business models are unsustainable. Why? Because of the logistical challenges of packaging and delivering fresh produce, and the high cost of acquiring fickle customers, through discounts and heavy marketing. Then there is the threat from supermarkets offering their own versions, as well as online retailers, notably Amazon, which hopes to expand its share of the grocery market.

Could UK operators move into the home-kits sector?
So what’s the next evolution of the home meal-kit and what can UK operators do to capitalise on this potential trend? I think it’s fair to say that cooking from home isn’t going away. By deploying smart technology and meticulous attention to operational efficiencies, could delivery of home meal-kits be a new revenue stream for hospitality operators? I think so.

Let’s take any hospitality brand who already promotes some of their customers’ favourite recipes online – why not take this one step further by creating recipe cards and meal-kits for customers to recreate and enjoy at home? This has the potential to not only create an ‘at-home’ experience for existing customers, but also open the doors to an entirely new audience and revenue stream.

Olo, a very special delivery model that allows operators to remain in charge of their digital customer journey
It is a fact that many operators have taken a step back to consider the profit lost on commission paid to third-party delivery platforms, which is typically around 30% of the order bill. US-based online digital ordering and delivery specialist, Olo, cleverly connects popular third-party delivery service providers into one platform, which then gives operators the freedom to offer direct delivery on their websites and apps. The beauty of this approach means operators can drive direct digital sales without losing their brand identity, customer engagement and profit.

The company now works with around 50% of all the publicly-listed restaurant brands in North America with a digital channel – but at a competitive rate and on a basis that leaves control in the operator’s hands. Might we see something like this in the UK?

Olo was founded in 2005, a couple of years before the smartphone era. 2018 was the company’s biggest period of growth to date, fulfilling 100 million orders that year alone. As of August 2018, Olo’s total orders increased to a staggering 116% year-on-year, with the brand adding one million new customers every two weeks. The business has forecast that in 2019 it will process another 200 million orders.

Here, Jackie Berg, VP Marketing for Olo, provides UK operators with her three top tips to getting their delivery model right:

1. SEO is absolutely crucial
Driving consumers to an operator’s direct channels, such as the company website or app, for delivery is imperative to customer ownership and cutting the cost of commission to third parties.

This is something Olo is incredibly passionate about – so much so that they created an index called the ‘Delivery Search Score’, which measures how many online searches for a brand name plus the word 'delivery,' work to direct customers to the operator’s own site.

Olo found the top 300 brands were performing at less than 30% of their potential with searches for their own keywords, allowing marketplaces to capture a major share of their delivery traffic. Not a single brand in the top 300 has unlocked 100% of its potential for delivery discovery.

2. Streamline platforms and remove tablet hell
Many hospitality operators face what Olo has affectionately termed “tablet hell”. This is essentially a tablet “farm” that sits atop counters receiving disparate third-party order channels.

A team member has to manually enter orders from different tablets into the EPoS to ensure every order is captured and accounted for. Olo’s product ‘Rails’ has removed this resource-heavy process for teams, by streamlining all third-party orders with a two-way synchronisation between third-party sites and the operator to process all orders into one format. No more tablet hell!

3. Never accept exclusives
Operators who enter into exclusive agreements with a single third-party delivery company are missing out on competitive negotiations to secure the best possible rates.

Delivery companies can take upwards of 30% in commissions and for operators with already thin margins, this can really eat into profits. Olo recommends that operators work with a variety of delivery partners, which will give them more options and competitive prices.

Irrespective of whether we’re talking about a potential new trend for operators to drive new revenue streams in the home meal-kits space, or capitalising on the latest innovations in the delivery sector, what is very clear is that this is all being driven by the consumer desire for convenience, which will never stop.

This will be further exacerbated by the staggering momentum technology is making in the hospitality space, meaning operators who want to stay relevant in a saturated marketplace need to be thinking smartly to reap the rewards.

(image: pexels)