Story by Gary Stevens
The COVID-19 pandemic is having huge effects on us worldwide. But as governments are attempting to figure out how to limit the spread of the disease and contain the global economic damage it has caused, a quiet revolution has been happening. Some businesses are seeing significant increases in customers, and hugely increased profit margins.
One type of company that has benefited has been those that offer food and recipe delivery services. With restaurants closed around the world, many analysts had predicted that the hospitality sector would be decimated. This has not happened. Instead, it appears that customers and startups are adapting to the crisis by finding new ways to fulfill old demands.
In this article, we’ll take a look at some of the food delivery startups that have done the best from the crisis, and explain what other startups can learn from them. If you are currently grappling with how to save your small business from COVID, or how to stop COVID from killing your startup, you might find some inspiration in these stories.
The Food Box Startup Boom
Though the COVID-19 pandemic has undoubtedly given a huge boost to the food and recipe box sector, it‘s worth recognizing that it has also been growing steadily for years. The past five years has seen many new startups of this type founded, and many have attracted significant amounts of funding.
The business model of most of these startups rests on two key insights. First, there is the tried and tested offer of convenience. Many of the companies who are seeing huge spikes in demand over the past few months are focused on providing meals to customers who find it hard to find the time to cook.
The convenience of having food or recipes delivered is only one part of the value these companies offer. McDonalds has been offering quick and convenient food for decades, but it does not appeal to the same target audience as food boxes and recipe delivery. The focus of many of these companies is to provide high-quality, nutritious food to customers who want to eat well and healthily, but find it hard to do so under the current circumstances.
For that reason, many of these companies either focus on a particular ingredient (see Pasta Evangelists), look to engage with particular audiences (such as veggie box startup Allplants), or on teaching customers to cook particular styles of cuisine (like My Cooking Box, which is focused on Italian recipes).
Adapting to the Crisis
Of course, the pandemic hasn’t exactly been plain sailing for these companies. Though well placed to serve customers stuck at home under lockdown orders, they have had to adapt to a new way of doing business. For Deliveroo, a giant in the food delivery market in the UK, this meant moving to “contactless” delivery, following a similar shift by several US startups earlier in the month.
This may seem like a seemingly simple shift from the consumers’ point of view. But for a restaurant, it means making dramatic changes in terms of how they conduct business operations in order to compete in a suddenly highly-competitive market. Under a contactless delivery model, for instance, restaurants have had to figure out logistics for delivering their food, doorstep ID verification, and how to securely handle their transactions online, a vitally important step especially since online fraud and hacking is more common now than it was before.
In Europe, startups that are built on this kind of delivery model have also had the luxury of government support for their delivery workers. Governments across the continent seem to have understood the knock-on effect of closing restaurants, and have accordingly provided support for self-employed delivery workers.
The New Normal
The food and recipe delivery sector is, of course, a unique one that has its own challenges and opportunities. Nevertheless, there are some key lessons to be learnt from the success of startups in this sector over the past few months.
The first is to recognize that the companies that have done the best over the past few months are those that were able to instantly scale to take advantage of extra customers. During the first month of the pandemic, many restaurants and food delivery services were simply not able to keep up with the surge in demand, and actually ended up losing a lot of customers as a result.
Secondly, it’s important for startups to thoroughly investigate the government help that is available to them. As we’ve previously pointed out, freelance is the future of work, but freelance workers must also be protected against short-term crises like the pandemic. If you don’t look after them at this time, you will lose a lot of expertise.
Third, as previously noted, online hacking is on the rise as cybercriminals exploit the pandemic. And as more restaurants and food delivery services than ever have been forced to turn to become fully dependent on online solutions to store their business data and process payments, it’s also more critical than ever before for restaurants and delivery services to begin investing in the right cybersecurity solutions.
Basic measures such as training employees about cybersecurity strategies, utilizing a secure web browser for that can actually keep business information private, and investing in data encryption solutions are all examples of tactics that restaurants and delivery services can use to keep cybercriminals at bay from accessing payment, business, or customer information.
Fourth and finally, bear in mind that in the crowded marketplace of restaurants and food delivery services, brand reputation counts for a lot. Signing up for a food delivery service is not the same as buying a meal in a restaurant – it requires a longer commitment, and is often more expensive – and so ensuring that your brand is backed by multiple, excellent customer reviews is key to attracting new customers seeking convenience, new experiences, or simply a way to get through the lockdown.
The Bottom Line
At the broadest level, the COVID-19 pandemic has been driving more and more activity online. For companies who can adapt to this shift, it represents a period of opportunity even if there is a fair amount of risk involved as well.
Offering customers a convenient way to shop has been a staple of the startup sector for decades, but this process has been accelerated by the pandemic. If you are a food delivery startup, you’re likely seeing customer demand spike. If you are not, you can look to this sector as an example of how to deal with the rapidly changing market demand.