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Last milers finish first

Lokesh Chawla

With restaurants needing to match customer expectations not just in food quality but, more importantly in a post-COVID scenario, in safe door delivery, the role of food delivery services has become critical.

The behemoth global online food-delivery services market is expected to touch $200 billion by 2025, according to Frost & Sullivan. North America has more than 10 online food-delivery companies; Grubhub, the largest player, accounts for more than one third of the market. Uber Eats is currently valued at $20 billion; with revenues of $1.4 billion annually and a presence in more than 670 cities on six continents, it delivers almost a billion meals every year. Europe’s Just Eat is present in eight countries in the region and holds more than 83% of the UK market. Interestingly, it recently acquired Grubhub for $7.3 billion. But the Asian markets rule, with a massive 55% share of the global online food-delivery market – with China alone registering over $34 billion in online food delivery revenues in 2018, according to that same study.

In other words, last-mile delivery is the biggest piece of the revenue pie in the restaurant business and it cannot be ignored.

Costs of last-mile delivery

Still, it is true that one of the biggest challenges this sector faces is profitability. Last-mile logistics is the most cost-intensive factor in the entire process of getting the food to the customer’s doorstep. A primary issue is that most of the process is still manual or executed with basic and siloed technologies. Ordering, routing, timely deliveries, billing, customer satisfaction – all face challenges. Even Amazon had to shut the doors on its Amazon Restaurants food-delivery service after the company attempted various strategies and even led a $575 million funding round for Deliveroo, a UK-based food-delivery company.

It’s not just a numbers game

The payoff in food delivery is more than just the valuations and revenue – the holy grail is actually the customer. The one who owns the last-mile delivery owns the customer’s loyalty. Take a typical family weekend dinner or even a meal for one: the food that gets ordered is influenced by the delivery app. Who delivers faster, has more restaurant options, provides lower delivery charges? These are the deciding factors. Some even have loyalty programs that deliver more value for money. So, the big factor at stake in the valuation chain here is brand loyalty.

Delivered by technology

While every business model is constantly iterating, last-mile delivery services are particularly challenged, and more so now in the post-COVID scenario. Some of the companies that have gotten it right adapted a suite of technologies to realize their goals. AI, data analytics, and machine learning play a significant role in enhancing real-time, micro-optimization of dynamic demand supply. Cloud technologies and automation play a huge role in significantly bringing down costs.

The customer is still at the heart of the experience. Apps that are built using AI and data analytics provide personalized and curated choices to customers that go a long way in attracting the customer’s loyalty. This, combined with an intuitive UX, will have the customer reaching for the app every time hunger strikes.

A great last-mile delivery service that delights consumers will go a long way towards attracting and retaining customers and significantly enhancing revenues.

Figure 1: Capgemini Research Institute Last-mile delivery consumer survey, Oct–Nov, 2018, N=2,874 customers

To learn more about Capgemini’s Restaurants & Retail practice, contact Lokesh Chawla, Director of Strategy, Execution and Global Sales at Capgemini for Retail, CPG, Logistics & Distribution at .