Food delivery business is now an inseparable entity from the F&B landscape in India. Originally a niche sector limited to metro cities, online food delivery has now spread across the entire country, penetrating Tier 2 and 3 cities. According to a recent report by Google and Boston Consulting Group (BCG), the Indian food delivery industry is projected to grow from $4 billion in 2019 to over $8 billion by 2023. This rapid expansion is largely fueled by the rising number of working professionals in urban areas who, with less time to cook but more disposable income, frequently order food. 

The number of orders on online food delivery platforms grew 20-fold from 2016 to 2021, with 25 million people now using food delivery apps daily. This growth has been driven by increasing smartphone penetration, working professionals with high disposable incomes, and the prevalence of nuclear families in urban regions. Tier 2 and 3 cities are driving much of this growth, accounting for 45% of orders, while metro areas are nearing saturation. Recognizing the untapped potential in non-metro cities, food tech companies are targeting these areas for expansion by offering vernacular interfaces, customized pricing, and hyperlocal menus.

Delivery First Model in Different Shape and Sizes

All these statistics have pushed the growth of the delivery first model in India. And while watching the trend, there are a number of unique concepts of delivery first model that have evolved in India. Restaurants are increasingly venturing into cloud kitchens and virtual restaurants to cater to the delivery-only business. Swiggy and Rebel Foods have established a network of commercial kitchen spaces optimized for efficient food preparation solely for delivery. Brands like The Bowl Company operate exclusively on Swiggy without any physical restaurants, allowing for rapid scaling based on demand dynamics without high rental overheads. Virtual restaurants exist only on platforms like Swiggy and Zomato, with kitchen space and food preparation leased on-demand from kitchen infrastructure providers, providing flexibility and the ability to validate multiple food concepts and cuisines without major upfront investment.

“In addition to these models, large players have launched private labels focusing on specific food categories like biryani or ice cream, which compete with traditional restaurant partners. These private labels offer platforms better margins and leverage in negotiating deals with existing restaurant partners. Furthermore, Swiggy and Zomato offer subscription plans with weekly or monthly packages for free or discounted deliveries, driving customer loyalty and retention. These programs incentivize customers to order more frequently, making food delivery platforms their preferred solution for everyday meals,” Vipin Khanna, Gurgaon based Independent food consultant commented.

This approach, which prioritizes food delivery over traditional dine-in services, is reshaping the way restaurants operate and interact with their customers. Several factors are driving this shift, including changing consumer preferences, operational efficiencies, technological advancements, and the evolving competitive landscape.

Changing Consumer Preferences

The convenience of online food delivery has become increasingly popular among Indian consumers, particularly among younger demographics such as Millennials and Gen Z. According to recent reports, these age groups are the most likely to use third-party delivery apps due to the ease of use and customization options they offer. Customers appreciate the ability to order food from the comfort of their homes, customize their meals to their liking, and track their delivery in real-time. This growing demand for convenience has made food delivery an essential service for modern consumers.

Cloud kitchens are rapidly gaining popularity by providing affordable, ready-to-eat meals delivered straight to customers. This trend has seen a significant surge in India, particularly among individuals with high disposable incomes and busy schedules who favor dining at home or in their workplaces. The Indian food industry, once dominated by traditional restaurants, is now embracing the advantages of a delivery-only model. These advantages include wider customer reach, lower startup costs, diverse sales channels, and growing market appeal due to the convenience factor, explains Vicky Singh, Founder and CEO of Smart Co-Kitchens.

Operational Efficiency and Cost Savings

Adopting a delivery-first model allows restaurants to operate from cloud kitchens, which significantly reduces overhead costs associated with maintaining physical dine-in spaces. Cloud kitchens, also known as ghost kitchens or virtual kitchens, focus solely on preparing food for delivery, eliminating the need for large dining areas and extensive front-of-house staff. This reduction in operational costs allows restaurants to allocate more resources to quality ingredients and efficient delivery services, ultimately improving their bottom line.

“Cloud kitchens minimize ancillary expenses, focusing mainly on food costs, staffing, and logistics. The capital required is considerably less than that of traditional restaurants, attracting many new entrants to the market. These kitchens, which only take orders online or via direct calls, operate purely on a B2C basis. Today, numerous online platforms partner with existing restaurants to simplify the ordering process and increase profits. Ideally, cloud kitchens should be located in areas that can efficiently serve both office areas and residential communities within a 30 minute window. They typically cover an area of 150-300 square feet and manage about 300 orders per day,” Himanshu Gujral, co-founder, Blazer Kitchens stated.

Technological Integration

The integration of advanced technology has been a game-changer for the food delivery industry in India. Online ordering platforms like Swiggy, Zomato, provide restaurants with valuable data and insights into customer preferences and ordering habits. This information helps restaurants optimize their menus, streamline operations, and tailor marketing strategies to attract and retain customers. Additionally, the use of restaurant management systems and delivery logistics platforms enables restaurants to handle high volumes of orders efficiently and maintain a high standard of service.

Scalability

One of the most significant advantages of the delivery-first model is its scalability. Unlike traditional brick-and-mortar restaurants, which require substantial capital investment to expand, delivery-first operations can easily scale to new locations with minimal setup costs. This flexibility allows restaurants to quickly enter new markets and reach a broader customer base without the constraints of physical space. As a result, many restaurants are opting for this model to achieve rapid growth and expand their presence across different regions.

Increased Market Reach

Partnering with third-party delivery platforms has enabled restaurants to tap into a much larger customer base beyond their immediate geographical location. By leveraging the extensive reach of platforms like Swiggy and Zomato, restaurants can attract customers from different parts of the city or even across multiple cities. This expanded market reach not only boosts sales but also enhances brand recognition and loyalty.

Competition and Market Dynamics

The competitive landscape in the food delivery industry is evolving rapidly. With the increasing popularity of food delivery services, more restaurants are entering the market, intensifying competition. To stay ahead, many restaurants are adopting innovative strategies, such as exclusive partnerships with delivery platforms, dynamic pricing, and targeted promotions. Additionally, the entry of new players and the consolidation of existing ones are reshaping the market dynamics, pushing restaurants to continuously adapt and innovate.

The delivery-first model is revolutionizing the restaurant industry in India by aligning with modern consumer demands, optimizing operational efficiencies, and leveraging technological advancements. As more restaurants embrace this model, it is likely to become the new standard in the industry, offering a sustainable and scalable way to meet the evolving needs of today's consumers. The ongoing preference for convenience and the dynamic competitive landscape suggest that the delivery-first approach will continue to shape the future of dining in India.