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by Ordering on Jun 30, 2022 3:12:56 PM
Using intermediaries has been a trend for more than five years now. The biggest players who have been on the market for many decades also joined the club of the on-demand delivery applications, for example, McDonald's, Burger King, Starbucks, etc.
However, since the beginning of the pandemic, there has been a huge shift in the third party sector end large businesses, as well as startups, are moving towards traditional direct sales more frequently.
D2C food and beverage market stood at $5.5 billion in 2020 and is projected to increase at a CAGR of around 40% to touch $15 billion by 2025.
Are you starting an on-demand online delivery service, or have you found yourself too dependent on third parties and would like to branch out on your own? In this article, we will discuss some reasons why direct sales are becoming more and more predominant.
Where have the third-party platforms gone wrong?
Commissions
The biggest D2C news of 2020 was that McDonald's had ended the exclusive partnership with Uber Eats and started collaborating with other third-party providers and investing in direct sales.
Since McDonald's accounted for nearly 60% of Uber Eats volume in 2019, this has been a great surprise.
According to McDonald's, the reason behind focusing more on direct sales and collaborating with other companies was that the platform was not willing to lower their extraordinarily high commission rates.
Small businesses are currently charged between 15-30% on this platform. Unfortunately, even loyal partners are not offered enough loyalty discounts and take those commissions into account every time they complete a sale.
Consequently, this caused many companies, including small restaurants, became unprofitable while depending too highly on the platform.
The convenience factor
At first, being part of a platform like Uber Eats seemed like an excellent way to branch out to a broader scope of new customers and reach new markets that were unattainable before. The third-party platforms had the benefit of exceptional technology and the convenience factor, which many companies could not afford to offer at the time.
However, access to on-demand delivery software became more possible as technology progressed, allowing franchisees and smaller restaurant businesses to create apps and websites.
The convenience factor is still definitely the number one selling point among customers, and they are still looking for a simple and speedy delivery. However, nowadays, platforms such as Uber Eats are not the only solution to offer it to their customers. Application and website usability became more of a standard and a requirement rather than a unique feature.
That's why franchises do not need third parties to the same extent as they used to, since investing in their own platforms became a lot easier and more affordable.
One-sided benefits
Another reason companies invest in direct platforms is that the collaboration between third-party giants and franchises was not always equally beneficial for both parties.
Taking the example of McDonald's in Uber Eats, it is reported that McDonald's made as much as 60% of the Uber Eats volume; at the same time, the revenue from Uber Eats made only 10% of McDonald's total sales.
As a result, the two companies did not benefit equally from the collaboration. Uber Eats needed McDonald's business a lot more than the other way around.
That is another reason why franchises re-evaluate their partnerships with third parties and calculate how much net income they are making after all the commissions have been deducted.
Customer data
Another very important reason for franchises to deviate from collaborations with firms is the access to their customers' data without any limitations.
Their platform and an order management system allow for more in-depth analysis of sales patterns, customer retention, and access to personal information like email addresses.
Having this type of information at hand gives franchises a huge opportunity to personalize their marketing campaigns and send emails according to customers' preferences.
Personal customer experience
Franchises such as McDonald's or Pizza Hut are known for providing a multisensory experience inside their restaurants; this includes colors, smell, and, most importantly, the consistency of their products and services.
Having a direct platform allows them to give their online customers a glimpse of being inside the restaurant instead of the very limited design options on third-party platforms.
Direct platforms allow total freedom design, features, payment methods, and discounts for loyal customers.
Not to mention, a direct platform allows for implementing memberships and increases the chances of the customer purchasing more products simultaneously.
