Delivery density: The secret ingredient to profitable food delivery services

The recent pivot by online restaurant marketplace Providoor – from hot meal delivery to frozen meals – has shed light on a crucial factor in the food delivery industry: delivery density. 

Optimizing food delivery is essential for keeping costs down, and thus ensuring profitability. Unfortunately, according to Locate2u founder and CEO Steve Orenstein, most companies don’t understand the fundamentals of delivery density.

Hot meals aren’t optimized for efficient delivery. “[It’s] really challenging because the driver can pick up a maximum of two to three parcels in one go,” explains Orenstein. “After that, the food obviously can’t be delivered because it’s going to be cold. Whereas frozen meals make a lot of sense.”

Delivery density: Why does it matter?

As the food industry continues to grow, companies must find ways to optimize operations while still making a profit. And by focusing on delivery density, businesses can reduce costs, boost efficiency, and provide better customer experiences. 

Orenstein explains,”If you don’t get delivery density right, your cost for delivery is gonna get too expensive, and you’re simply not gonna get drivers to be able to do it at the price that you’re wanting to be able to charge your customers.”

Frozen meals, on the other hand, allow for a more efficient delivery process compared to hot food. By delivering frozen meals, companies can consolidate orders and reduce the number of trips required, ultimately improving delivery density and lowering costs. 

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Says Orenstein: “Refrigerated vehicles pick up 50 parcels, 100 parcels in one go. The driver [can deliver to] multiple suburbs, and make decent money as well.” 

Providoor’s shift to a frozen meal delivery model is a prime example of how companies can adapt their strategies to improve delivery density. 

Providoor’s strategic shift

Until earlier this month, Providoor offered both frozen and hot meals. The cooked meals were based on recipes from renowned chefs, prepared in Providoor’s own kitchens, and distributed to customers by delivery drivers. 

However, Providoor managing director Sam Benjamin told The Australian Financial Review that the home delivery takeaway model was inefficient. He said customers prefer frozen meals, a growing trend that increases by 30% each month. 

The company also boasted delivering high-end food in under seven minutes. However, third-party logistics stretched the delivery times to 45 minutes. “I’m responsible for the brands of these chefs […] and it wasn’t good enough because the drivers have to pick up too many orders at once.”

Providoor’s move “makes complete sense” according to Orenstein. “It’s great to see they’re making that change. And I think companies that are thinking about delivery really need to think about route density, how much a driver’s gonna get paid, but also how much you’re gonna be able to charge your customers.”

Tips for optimizing delivery density

Companies who want to take their delivery game to the next level can consider several additional strategies, such as batch orders, off-peak ordering, and route optimization. 

Batch orders:

Grouping orders from the same area can help reduce the number of trips required and improve efficiency.

Encourage off-peak orders:

Give customers incentives to place orders during off-peak hours so the demand is spread out to improve delivery. However, it’s important to note that while incentivizing customers to order during off-peak times, peak delivery slots cannot be neglected either. 

Don’t fall into this trap: Zomato urges customers to stop ordering during peak times.

Implement route optimization:

According to a report by McKinsey & Company, route optimization software can help reduce delivery costs by up to 20%.

NOW READ: How To Optimize Delivery Routes

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