Can Food Delivery Apps Break into Retail through Special Occasions?

Online food delivery apps saw an explosion in popularity during the COVID-19 pandemic. With lockdowns keeping consumers at home, usage soared. Major delivery services saw gross merchandise increase by at least 75%. However, with the regression of the pandemic and return to normalcy, demand dampened. Despite consistently higher revenues across the industry, valuations of many apps began to decline significantly from their 2020 peak.

Market leaders have identified non-food merchandise as an area of future growth, expanding their services into groceries, alcohol, and other merchandise to capitalize on their ownership of “last mile.” Yet their capabilities notwithstanding, customers awareness of partnerships with non-restaurant retailers remains limited.

To grow delivery retail services, YCCI explored customer behavior on high-purchase special occasions including Valentine’s Day, Mother’s and Father’s Day, and Easter to identify key marketing opportunities. Researchers conducted 25 in-depth interviews with delivery app users to uncover insights into their beliefs surrounding delivery apps on targeted special occasions. These insights were then tested in surveys with over 3000 respondents to confirm hypotheses and yield insights.

It’s Convenient, but Is It Special?

Delivery apps are known for their convenience, and their marketing emphasizes how their last-mile services can solve last-minute problems. While interview subjects confirmed this association, the convenience of solving a last-minute crisis in the context of a special occasion was dampened by several factors.

First, customers who had had a negative experience using delivery apps in other circumstances—like unauthorized shopper substitutions, products that don’t match their description, or a missing delivery—worried that such inherent risks to third-person shoppers would be much more damaging if used for a special occasion or a gift.

Interviewees also shared their impression that using a delivery service did not signal effort and thoughtfulness to the recipient. That is, a key benefit of delivery apps in other circumstances—gratification at the press of a button—backfired when these services were translated into purchases for a special occasion.

And finally, there is the issue that a purchase through an app would not be gift-ready for the recipient. Even if ordering was a quick way to make up for a missing gift, it could not be delivered directly to the recipient, which limits the utility of the option.

Where Delivery Apps Can Deliver

Despite these challenges in customer perceptions, delivery apps are built on a foundation that address customers’ deeply ingrained needs on these special occasions. Insights from YCCI’s study indicate that customer needs centered around three key, addressable areas that can be leveraged by delivery apps to overcome barriers and win during special occasions.

1. Suggestion

Several key occasions demand creativity of the customer, making any service that can supply them with ideas a bonus. For example, ethnographies and interviews found that customers consistently wanted more ways to make their Valentine’s Day celebration unique and answers to the elusive question of what to buy dad for Father’s Day. If the app provides last-minute services, it can also provide the last-minute ideas.

Gift guides are a standard tool for customers on special occasions, but interviewees were enthusiastic about in-app gift guides and indicators of best-selling or highly rated items. At the survey stage, YCCI found that respondents increased their likelihood to use delivery apps if they contained gift guides, especially if those guides were specialized.

2. Surprise

A unique benefit of delivery is not just its convenience; receiving a delivered gift also turns the moment into an experience.

Our interview subjects emphasized that providing a memorable gifting experience was an important element of gift-giving. The element of surprise that delivery can elicit is an important advantage that delivery apps can use to improve customer experiences of their services.

YCCI tested this hypothesis against two holidays: Valentine’s Day and Mother’s Day. When survey respondents were presented with treatments that emphasized the recipient’s surprise and joy, it was found to increase their likelihood to use a delivery app.

3. Gift-Readiness

Customers were consistently interested in campaigns that would allow them to purchase a gift on their delivery app and deliver it in style to the recipient. This extended from Easter baskets to pre-assembled Valentine’s Day kits and New Year’s Day hangover recuperation gift bags.

Advertising a service to wrap gifts before delivery also increased recipients’ willingness to use delivery apps for their needs on special occasions.

While building customer awareness of non-food merchandise on delivery apps has many potential entry points, reframing their benefits on key marketing occasions to better meet customer needs provides an opportunity to that can overcome potential barriers. Showing how delivery apps can be source of inspiration, surprise and finishing touches when it comes to gift-giving can help shift customer perceptions of their app from a last-minute, “lazy” option into a thoughtful “go-to” source for gift-giving.

To explore more ways to uncover insights on consumer behavior, reach out to us at ycci@som.yale.edu. Read more from YCCI here.