On-demand food delivery: investigating the economic performances

Abstract

PurposeThis paper focusses on on-demand food delivery (ODFD), i.e. the delivery of freshly prepared meals to customers' homes, enabled by the use of online platforms. In ODFD, a key process is represented by last-mile deliveries (LMDs): they directly affect customers (the delivery price influences their purchase intention), riders (the compensation drives their willingness to perform deliveries) and platforms (deliveries are very expensive). In this context, this work aims to investigate the economic performances of ODFD LMDs.Design/methodology/approachThis study adopts a multi-method threefold process. First, it develops a model that – after the generation of customers' demand and the assignment of deliveries to available riders – identifies incomes and costs faced by an ODFD operator. Second, the model is applied to a base case in Milan (Italy). Third, sensitivity analyses are performed (on daily demand and riders' salary).FindingsThe analyses allow – besides the identification of significant values associated to ODFD profitability – to draw general insights about delivery price (e.g. free delivery is not economically sustainable), daily demand (e.g. greater demand values do not only improve positive results but also worsen negative ones) and fixed/variable wage mix (e.g. increasing the variable wage enhances the profitability for platforms).Originality/valueOn the academic side, this word enhances extant literature about ODFD, proposing a model – with multidisciplinary implications – to strategically investigate profitability conditions of LMDs. On the managerial side, it provides support for (logistics/marketing) ODFD practitioners since it allows to evaluate the potential impact of significant decisions on profitability.

Online food delivery research: a systematic literature review

“…From the economic angle, the costs associated with OFD, such as food, delivery fees and commissions, directly affect all the stakeholders like consumers (paying the price for food and delivery), restaurants (paying commissions for exposure through platforms) and drivers (willingness to perform deliveries is a function of remuneration received) (Seghezzi and Mangiaracina, 2021). The rise of OFD has generated a positive economic impact by increasing the job opportunities for drivers, chefs and administrative staff.…”

“…Yang et al (2021) validated this implication in the case of Chinese luxury restaurants that entered into the ordering and delivery business to survive during COVID. OFD has provided numerous employment opportunities for food delivery drivers, which highlights that the OFD platform can potentially improve the lives of middle- and lower-income groups in both emerging and developed economies (Seghezzi and Mangiaracina, 2021). However, researchers have also emphasized on understanding the impact of a growing volume of OFD orders on the working condition of the drivers (e.g.…”

Enhancing in-store picking for e-grocery: an empirical-based model

“…In step 3, the goal of the interviews was to collect data to feed the model. In line with previous similar works (Seghezzi and Mangiaracina, 2020), participants were first interviewed individually to gather data about their specific context, avoiding influences from the other e-grocers. A group interview was then performed to design a representative "exemplary" case for the model application.…”

Last-mile challenges in on-demand food delivery during COVID-19: understanding the riders' perspective using a grounded theory approach

“…The difficulties of riders have been explored concerning the renegotiation of their low salaries (van Doorn, 2020), job stress, and usage of worker silence and worker's voice to understand how riders respond to workplace issues (Kougiannou and Mendonça, 2021). In other aspects, a few studies integrate the functions of multiple actors, such as investigating the economic performance of ODFD firms with multiple stakeholder performance indicators (Seghezzi and Mangiaracina, 2020), flexible arrangements of delivery using actors' cooperation (Richardson, 2020) and listing the positive and negative impacts of ODFD services on restaurants and riders (Li et al , 2020).…”