Why Startups Might Eat the Food World’s Lunch
Uber and Airbnb rose to prominence by disrupting “dinosaurs” in their spaces. They have taken advantage of mobile technology to reach people and combat some of the long-standing traditional industry giants.
So who will be disrupted next? Probably industries that haven’t quite cracked the mobile code yet. According to comScore’s latest figures, Americans now spend more time on their mobile devices than they do on their desktops. Mobile usage has become the daily ritual of the modern era: Mary Meeker’s 2014 Internet Trends report said that people check their smartphones more than 150 times a day. Consequently, industries that fail to adapt to these changes are going to get shaken up by startups that put mobile at the forefront of their strategies.
Chief among them are grocery businesses and restaurant chains. Supermarkets account for 25 percent of the National Retail Federation’s Top 100 retailers, but only one out of 25 of these stores let shoppers make in-app purchases. The top grocery chains haven’t yet capitalized on allowing people to order grocery delivery from their phones. Restaurant chains are doing slightly better: More than 80 percent have apps, and more than 60 percent let you order directly from the app. However, these restaurant apps are among the lowest-ranked on the Top 100 retailers list. Between poor app design and lack of in-app purchase capabilities, grocery stores and restaurant chains remain an area of huge opportunity for new challengers.
Leading the pack are new-media darlings Instacart and Blue Apron, which present convenient and native-to-mobile services. The food world (supermarkets and restaurants) looks like it might get shaken up the same way the taxi and hotel industry did by Uber and Airbnb.
Who are some of the other winners and losers from this list?
- Department stores: 76 percent have apps. 58 percent let you make in-app purchases.
- Pharmacies: Average App Store rating: 3.63.
- Online retail: 83 percent let you make in-app purchases.
- Supermarkets: Only 4.5 percent let you make in-app purchases.
- Restaurant chains: Average App Store rating: 2.59.
VCs have already started to realize how much space for disruption there is. Here’s a breakdown of how much VC funding that 10 select grocery/food-delivery startups have gotten per year since 2012:
VC funding for 10 select grocery/food-delivery startups, by year
- 2012: $19.25mm
- 2013: $60.90mm
- 2014: $187.80mm
How can these companies make sure they position themselves to stay relevant and take advantage of the growth of mobile?
- Invest in a strong mobile experience: Push customers to use the app as often as possible, with strong, easy-to-navigate design.
- Develop a mobile-specific communications strategy: Via push notifications, mobile ads and emails.
- Deep-link to the app: Don’t simply redirect to your desktop site; keep everything from product pages to cart checkout within the app itself.
- Make payment easy: Create a seamless, one-click purchase path within the app to minimize hassle for customers.
A few years ago, Marc Andreessen said “software is eating the world.” Unless grocery and restaurant incumbents refocus their mobile efforts, someone else might just eat their lunch. But if the incumbents understand and invest in delivering a strong mobile experience, they are well positioned to benefit from the explosive growth mobile provides.
Adam Foroughi is co-founder and CEO of AppLovin, mobile advertising technology that enables brands to acquire and re-engage customers on mobile. The company offers dynamic ads to over a billion consumers each month and works with 300+ world-class brands, including OpenTable, Hotels.com, eBay, Spotify, GREE, Zynga and Groupon. Reach him @AppLovin.