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So product manager, how do you measure how successful you are being? If you are like most of us, if you are always on the move and always have things that you need to be doing you are probably feeling pretty good about how things are going for both your product and your company. However, in the world of food delivery services, their product managers are running around like chickens with their heads cut off and yet they are still not being profitable. Something is wrong with their product development definition. What are they doing wrong?
Challenges & Opportunities
So what’s going on? Well, the arrival of the Covid-19 virus provided food-delivery companies an unprecedented business opportunity: millions of Americans stuck at home, missing their favorite restaurants. Yet product managers at these firms are struggling to profit from one of the greatest food-delivery markets in decades. These companies which include Grubhub and Uber Eats, are losing money on delivery orders or are barely breaking even. Just to make things even trickier, nobody is sure how many diners will stick with delivery after stay-at-home orders are relaxed.
The good news for product managers at these firms is that sales for Grubhub, Uber Eats, DoorDash Inc. and Postmates are growing, according to both the companies and credit-card data. This is good news for everyone’s product manager resume. However, increased costs to fund promotions and safety equipment on one hand, and pressure to reduce commissions for strapped restaurants on the other, have created an even worse financial proposition for these food-delivery companies.
What product managers are starting to realize is that the current level of competition is unsustainable. Some product managers have described the current food delivery market as being “highly loss making, cash burning, basically handing out food for free”. Some restaurants say they are losing patience with the fees delivery companies charge to pay drivers and spend on marketing to reach customers, among other costs.
How To Fix The Problem
Product managers understand and acknowledge that the crisis has exacerbated tensions with restaurants. Product managers have to do everything they can imagine to help restaurants because, at the end of the day, the restaurants’ business is their business. Some restaurants say delivery companies have helped them make sales while their dining rooms are closed. Several restaurant chains have joined with delivery companies during the crisis for the first time.
Before the pandemic, delivery companies had to tap investor cash to expand across the U.S. into each other’s strongholds, fueling competition in the past two years. DoorDash, Postmates, Uber Eats and Grubhub serve upward of 3,000 cities, or more than 70% of the U.S. population. However, the pandemic has created additional challenges delivery companies hadn’t faced before. There is more competition for to-go business, with restaurants desperate for more sales signing deals with more delivery companies. That is putting an end to the exclusive deals some food-delivery companies had with chains.
Delivery was the least-preferred way of obtaining to-go restaurant food in March. Drive through’s share of transactions at restaurants gained the most during the period, while carryout also rose. What product managers are starting to do is to invest in carryout operations that are more profitable for them than delivery partnerships. These investments will provide them with a direct connect between then and the guest. This is their preference. Sit-down booking services such as Tock are also trying to get into the to-go business by brokering delivery services for restaurants that they say charge lower commissions than the established companies.
What All Of This Means For You
Right now is a boom time for the food delivery services. The arrival of the Covid-19 virus has resulted in more and more people staying home and ordering their favorite restaurant food to be delivered to them. The product managers who work for these food delivery firms are quite busy doing what their product manager job description tells them to do. However, right now their firms are not profitable. How much longer can this go on?
Currently the food delivery services are either losing money or barely breaking even. Additionally, nobody is sure how many orders they’ll get once people no longer have to stay at home. In the food delivery business, sales are growing and there are signs of consolidation starting to happen. To be successful product managers have to maintain good relationships with restaurants. The virus has boosted completion in the food delivery business and has removed exclusive deals that some services had with specific restaurants. Product managers are starting to invest more into their carry out service in order to have better contact with their customers.
Clearly the service that the food delivery product managers are providing is a needed service. The big question is if there are too many companies currently providing this service. Additionally, the demand for this product is artificially high right now due to virus stay-at-home orders. Once those are lifted, we’ll have to see what it does to the demand for this product. Food delivery product managers are going to have to take a careful look at their market and make some decisions about how they want to make their business become profitable.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that carry out orders will start to compete with home delivery orders?
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What We’ll Be Talking About Next Time
If you’d like to sign up for a challenging product manager job, then perhaps you’d like to look into what it would take to become the product manager for a mall. Back in the day, malls where where everyone in town would go to do their shopping. They had movie theaters, food courts, and, of course, plenty of parking. However, times have changed. Now people do more shopping online and we don’t seem to be heading out to the mall nearly as often as we used to. Clearly it is time for mall product managers to update their product development definition. What’s a mall product manager to do in order to keep their product alive?