On-demand food delivery: investigating the economic performances

A paper by Arianna Seghezzi and Riccardo Mangiaracina focuses on on-demand food delivery (ODFD); the delivery of freshly prepared meals to customershomes, enabled by 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).

The research allows besides the identification of significant values associated with ODFD profitability to draw general insights about:

  • delivery price: free delivery is not economically sustainable
  • daily demand: greater demand values do not only improve positive results but also worsen negative ones
  • fixed/variable wage mix: increasing the variable wage enhances the profitability for platforms.

This research may lead to implications for academics, practitioners, and decision-makers. On the academic side, it enhances extant scientific knowledge about logistics in the ODFD business, proposing a model to evaluate costs and incomes of the LMD phase and to assess the impact that variations in significant variables may have on them.

On the managerial side, this work can provide support for practitioners operating in the ODFD industry since it allows to identify under which conditions profitability can be achieved and to analyze how profitability changes if varying specific choices or context parameters. More in detail, it could be useful to practitioners of ODFD platforms from both the logistics and marketing fields to make strategic decisions, e.g. set the delivery price and managers of restaurants, to set evaluations about the price to be proposed to take-away customers if compared to traditionalones.

In addition, legislators could benefit from the developed analysis in order to rely on quantitative results in evaluating the effects of alternative actions they may implement. Considering, for instance, labor regulations (e.g. forcing ODFD platforms to hire riders as traditional employees), they may have a strong impact on both the salary (type and amount of remuneration) and the working shifts of the riders. The model could help in evaluating the effects of these decisions on the business profitability.

Source: Seghezzi, A. and Mangiaracina, R. (2020), “On-demand food delivery: investigating the economic performances”, International Journal of Retail & Distribution Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJRDM-02-2020-0043

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