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<\/p>\nThe food industry is changing to accommodate younger generations\u2019 eating habits. The U.S. Department of Agriculture reported that millennials (those born between 1981 to mid-2000s) are most likely to eat in restaurants and to buy prepared meals. They increasingly value convenience over other factors when making meal choices, spending less time on food prep than any other generation. This has made room for a rise in meal delivery services, among which Seamless has established itself as a major player [1]. In 2016, 7% of total U.S. restaurant sales was comprised of delivery transactions. Analysts believe this could rise to as high as 40% [2].<\/p>\n
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Now part of GrubHub\u2019s portfolio of brands, Seamless was one of the earliest platforms in the space. Launched in 1999, Seamless aggregates menus from various local restaurants onto a single platform, which can be accessed by web browser or mobile app. Customers select their food choices from an online menu, pay via the platform, and then receive their food at a designated location [3]. As of May 2013, Seamless worked with 12,000 restaurants in 40 cities [4]. Their parent company, GrubHub, owns a portfolio or brands encompassing over 80,000 takeout restaurants in 1,600 U.S. cities (and London) [5].<\/p>\n
Focusing on the direct-to-consumer business (it is also offered to businesses), Seamless creates value for customers by aggregating multiple restaurants\u2019 menus into a single place. Prior to Seamless, customers depended on drawers full of paper menus or knowledge of local restaurants; their options were limited. The experience of placing an order could also be painful, from placing the order to making payment. Customers had to call and speak on the phone with restaurants, which could lead to miscommunication or order errors, and they had to hope that they had enough cash on hand to pay and tip. With the online platform, customers could access a greater variety of restaurants beyond their immediate neighborhoods, improve order precision via online menus and written instructions, and select their preferred payment method.<\/p>\n
For restaurants, Seamless creates value by expanding their customer base to new potential customers. For the same reasons (order precision, clear instructions), they can improve the customer experience. The platform lowers barriers for customers to purchase from restaurants they might not have reached in the past. In addition, it can be a marketing tool to attract new customers.<\/p>\n
As Seamless has grown and scaled, the way it captures value has proven challenging to the restaurant side of the platform. Seamless collects a fee, averaging 13.5%, from restaurants for each transaction, but restaurants must also staff couriers to carry out the deliveries [6]. Mulberry & Vine, a restaurant in NYC, estimated that 20-40% of revenue goes to platforms like Seamless and \u201cthat in the past three years [their] over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery.\u201d Seamless exerts additional power by favoring restaurants based on the commission they pay; restaurants can appear higher in search results by paying a higher fee. However, since the cross-side network effects can be quite strong \u2013 more users attract more restaurants \u2013 restaurants cannot afford to stay off of a platform like Seamless. A restaurant representative said, \u201csometimes it seems like we\u2019re making food to make Seamless profitable,\u201d but \u201cit\u2019s really becoming a bulk part of our business, so it\u2019s not something we can cut\u201d [7].<\/p>\n
These tensions in the restaurant industry echo tensions rising in other platform-dominated spaces, such as in the ride-sharing or home rental space. More and more, these platforms have a \u201ctendency to metastasize from transaction enablers to, with sufficient success, participation gatekeepers\u201d [8].<\/p>\n
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Sources:<\/p>\n
[1] Oyedele, Akin. \u201cMillennials’ eating habits are wildly different from their parents’ \u2014 and the food industry has to face urgent consequences.\u201d Business Insider<\/em>, 4 Mar. 2018, http:\/\/www.businessinsider.com\/how-millennials-eating-habits-differ-from-baby-boomers-2018-3.<\/p>\n [2] Dunn, Elizabeth. \u201cHow delivery apps may put your favorite restaurant out of business.\u201d The New Yorker<\/em>, 3 Feb. 2018. https:\/\/www.newyorker.com\/culture\/annals-of-gastronomy\/are-delivery-apps-killing-restaurants.<\/p>\n [3] Seamless website, \u201cAbout Me.\u201d Accessed 4 Mar. 2018. https:\/\/www.seamless.com\/about.<\/p>\n [4] McBride, Sarah. \u201cOnline takeout companies GrubHub and Seamless to merge.\u201d Reuters<\/em>, 20 May 2013. https:\/\/www.reuters.com\/article\/net-us-grubhubb-seamless\/online-takeout-companies-grubhub-and-seamless-to-merge-idUSBRE94J0N320130520.<\/p>\n [5] GrubHub website, \u201cInvestors: What Is GrubHub?\u201d Accessed 4 Mar. 2018. https:\/\/investors.grubhub.com\/investors\/overview\/default.aspx?LanguageId=1.<\/p>\n [6] Seward, Zachary. \u201cGrubHub and Seamless take a 13.5% cut of their average delivery order.\u201d Quartz<\/em>, 1 Mar. 2014. https:\/\/qz.com\/182961\/grubhub-and-seamless-take-a-13-5-cut-of-their-average-delivery-order\/.<\/p>\n [7] Dunn, Elizabeth. \u201cHow delivery apps may put your favorite restaurant out of business.\u201d The New Yorker<\/em>, 3 Feb. 2018. https:\/\/www.newyorker.com\/culture\/annals-of-gastronomy\/are-delivery-apps-killing-restaurants.<\/p>\n [8] Herrman, John. \u201cPlatform Companies Are Becoming More Powerful \u2013 but What Exactly Do They Want?\u201d The New York Times<\/em>, 21 Mar. 2017. https:\/\/www.nytimes.com\/2017\/03\/21\/magazine\/platform-companies-are-becoming-more-powerful-but-what-exactly-do-they-want.html.<\/p>\n","protected":false},"excerpt":{"rendered":" As food-delivery services become more popular for their convenience, restaurants suffer.<\/p>\n","protected":false},"author":2411,"featured_media":6826,"comment_status":"open","ping_status":"closed","template":"","categories":[2031,671],"class_list":["post-6825","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-food-delivery","category-restaurants","hck-taxonomy-organization-seamless","hck-taxonomy-industry-food-and-beverage","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/growing-businesses-in-the-age-of-platforms-2018\/","yoast_head":"\n