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Grubhub, Seamless, UberEATS and other food delivery applications have become a staple of modern living. Yet for all the convenience those services offer, how much do consumers really pay for having their culinary indulgences delivered at the touch of a button?
According to a new report, the price is much higher than some think.
Recent data from Lux Research report shows businesses like Blue Apron and UberEATS are developing business models that show just how much diners are willing to pay for not having to prepare or pick up their own meals. Lux's research shows that, on average, consumers are willing to pay 11 percent more for each added layer of convenience in the food chain in anything from online grocery delivery to restaurant take-out.
The premium consumers are willing to pay a premium varies according to the service provided, Lux said, which means grocery delivery costs are different from a takeout order, which differs from a meal kit that requires some assembly.
"Meal kits are saying we are going to take away the hassle of some of the steps that you don't like," said analyst Camila Stice, "Maybe you don't like going to the grocery store, thinking about how many carrots to buy, wash them, how much you need. All of that is taken care of but you still get the experience of cooking a meal."
'The same is happening with food'
Acquiring food online is a relatively recent concept, but goods from groceries to fully prepared meals have become available at the tap of a finger. The future could be an extension of those trends.
Lux's figures—and consumers' increasing willingness to shell out money for convenience meals—are the latest signs of the far reaching effects of the on-demand economy.
"Every other retail category has been disrupted by e-commerce, and the same is now happening with food. It's interesting to see all of this innovation happening," Blue Apron Fonder and CEO Matt Salzberg told CNBC recently.
Salzberg said his company's main objective is to "grow higher quality food at a better value, by taking out the tremendous waste and inefficiency that exists in the current supply chain."
The change in consumer's habits is in part due to a lack of trust in the large processed food companies of past generations, Salzberg added. In that vein, Blue Apron works directly with farmers and cuts out the middlemen. However, Salzberg cautioned the company isn't trying recreate a brick and mortar experience.
It's a point that other analysts and food purveyors say helps to boost the evolving model of food service. Delivery of goods has now become the standard rather than a point of differentiation, said Lux's Stice.
"There's this shift towards making your life more efficient and being able to access more of your city to find different places." said Kristin Schaefer, a senior vp of strategy and finance at Postmates, a food delivery service. Success also hinges on how much consumers have to spend on such luxuries, she added.
"The vast majority of discretionary income is spent in cities. To us, the value is in making that local inventory more accessible to people. That's been a really difficult problem to crack for a long time," she stated.
Postmates users tend to prefer local goods, but the company has noted a shift in how those consumers are getting food. When Postmates first started, the very first iteration was more like a point to point courier delivery.
Eventually, however, customers began hacking the system by asking couriers to pay for the food and paying them back upon delivery. Currently, Postmates provides payment options already built into its app.
Meanwhile, consumer tastes have also evolved markedly. In the past five years, Postmates has seen prepared food orders go from nearly 100 percent of their orders to about 80 percent. More users are now using the service to order deliveries for other things like electronics.
Stice suggested that, in the future, customers could also see a change in where their food or goods get delivered. For example, rather than taking delivery at a home or office, the customer could move to alternative, temporary location such as a park—getting their order there.
"Within the food industry in general, from the food and nutrition angle, things are becoming really hyper-personalized," said Stiles. She referred to a recent Coca-Cola promotion where packages featured individuals' names, and new nutrition trends that create a diet based on genetics.
"We see that this is going to be an added layer that new businesses can put on," Stiles said.