Shifts in Food-Delivery Preferences Among Consumers

As the food-delivery industry continues to develop from the surge it experienced during the pandemic, people are altering their food-ordering practices due to financial worries.

People are still investing more money into the most popular food-delivery apps, such as DoorDash Inc., which has seen a 3.26% decrease.

The stock of Uber Technologies Inc. has seen a 0.78% change.

Analysts and industry executives have observed that the growth of Uber Eats is slowing and people are being more frugal with their spending. It has been noted that people are opting for in-store pickups, ordering fewer items, and altering what they have delivered.

In a recent interview, DoorDash Chief Financial Officer Prabir Adarkar noted that most people have a budget and are continuing to use delivery services as part of their daily routine, but are making adjustments to their behavior.

He noted that some people are shifting away from pricey eateries and towards fast food, while others are ordering fewer items when they go out to eat.

Restaurant owners have reported that some patrons are opting to pick up their orders instead of having them delivered, likely to avoid the associated fees.

Todd Penegor, the Chief Executive of Wendy's Co., noted in an interview that people are increasingly turning to mobile ordering and taking their food home as their finances become tighter.

The Covid-19 pandemic has caused a surge in the use of food-delivery apps. DoorDash and Uber Eats, which together make up 90% of the U.S. food-delivery market, have seen a rise in sales. However, the industry as a whole has seen a decrease in growth.

YipitData, a market research firm that monitors emailed receipts, reported that the orders placed on DoorDash, Uber Eats and Grubhub increased by an average of 5% year-over-year in October and November, which is the slowest two-month growth since the pandemic began. Additionally, the amount of spending on these apps grew by an average of 9% year-over-year, which is the slowest rate in more than two years.

Since April, Just Eat Takeaway.com NV, the European owner of Grubhub, America's third-largest food-delivery app, has been looking into selling the app due to a decrease in orders and spending.

This year, DoorDash's stock has dropped by 69%, almost double the Nasdaq Composite Index's decrease of 35%. Just Eat's shares have decreased by 58%, and Uber's, which also has a ride-sharing service, have gone down by 41%.

Analysts are generally expecting DoorDash and Uber Eats to keep growing. Robert Mollins from Gordon Haskett Research Advisors, however, believes that the decrease in website traffic this quarter could mean that order volume will not be as high as other analysts are expecting.

According to Mr. Mollins, companies are currently vulnerable to macroeconomic forces, particularly when it comes to customers with lower incomes.

A representative from DoorDash stated that the company has been exceeding market expectations. He noted that forecasts based on app downloads, web visits, and email receipts have been unable to accurately predict their growth.

Last month, DoorDash predicted that spending would increase by up to 27% in the current quarter compared to the same period last year. The company did not provide an estimate for the number of orders.

DoorDash and Uber Eats are attempting to draw in more customers with special offers on their subscription services, which include price reductions on food and delivery fees. Uber is offering its yearly membership at a 50% discount as a gift. Generally, subscribers spend more, order more often, and bring in recurring income to the apps.

Cost-conscious consumers are increasingly turning to subscription services to save money, according to Uber Eats. The app reported that 40% of its U.S. orders in December were from subscribers, a 13% increase from the same period in the previous year.

Grubhub has added a feature that allows multiple orders to be combined, allowing customers to save on delivery fees.

In an effort to reduce expenses, DoorDash recently let go of 1,250 workers and Uber has announced that it will be cutting back on marketing costs and halting recruitment.

In a memo to staff apologizing for the layoffs, DoorDash CEO Tony Xu noted that while their business has been more resilient than other e-commerce companies, they are still affected by external challenges and have seen a decrease in growth compared to their pandemic growth rates.

According to data collected by market-research firm NPD Group from restaurant chains, fast-food-chain delivery orders through apps and restaurants' own channels decreased by 11% in the 12 months leading up to November when compared to the same period the year before. The only type of to-go business that saw an increase during that period was pickup orders, as indicated by NPD data.

Restaurant chains have reported that customers, particularly those with lower incomes, are ordering less expensive items or fewer items. Shake Shack Inc. has noted that they have seen a decrease in orders from their lower-income customers and anticipate that this trend will continue. Chuy's Holdings, Inc. has also informed investors that their to-go alcohol sales have decreased.

Chipotle Mexican Grill Inc. CEO Brian Niccol expressed in an interview that this is part of the overall trend of reverting back to the behaviors that were present before the Covid-19 pandemic.