In-House vs. Third-Party Delivery Services: Which is Best for Your Business?

In an era where convenience is king, delivery services have been pivotal for online retailers and restaurant industries. Amazon has spearheaded the movement towards a seamless purchase-to-doorstep experience that has seemingly set the standard every other business industry should strive for, especially those in food delivery.

With the growing demand and consumer expectations, businesses face a strategic analysis paralysis: Should we opt for in-house or third-party delivery services?
This article briefly overviews in-house and third-party delivery, their pros and cons, and which alternative best suits your business. Let’s get right into it.

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This particular delivery model is designed to ensure you can manage all aspects of the delivery process. It enables complete control of the delivery experience, from receiving orders to delivering to doorsteps, including who delivers them, the delivery radius, and wait times to be relayed to the consumers.

However, managing them all may incur fairly hefty expenses in the short run. Despite this, there are justifiable reasons why businesses still choose to use in-house delivery services.

• Keep higher profit margins. Instead of giving a portion of the order price to party delivery services, you keep all the order price revenue, optimising your profit margin per order. Despite the initial investment/costs incurred, this maximises profit in the long run.
• Foster customer relationships. Getting orders delivered by strangers creates a disassociation between your customer and your business. In-house delivery bridges that gap by creating some familiarity. For example, having the same delivery couriers hand in customer orders occasionally helps couriers form bonds with customers, encouraging brand loyalty.
• Retain access to a more extensive customer base. Particularly for restaurants, 78% of customers who order online prefer directly ordering from restaurants as opposed to third-party deliveries. This makes setting up functionalities such as order management, route planning, GPS tracking systems, and reducing delivery costs critical to staying competitive. This is precisely what Pandabox can do for your business.
• Greater business-to-customer communication. Using in-house delivery helps mitigate any communication barriers with customers. This enables your business to keep customers informed and assured through automated information exchange and monitoring that automation platforms like Pandabox provide. Hence gradually building trust and earn loyalty.

• There are substantial initial investment costs involved in setting up a functional delivery service. This includes choosing a reliable payment system, delivery vehicles, driver insurance, and a delivery tracking system. However, the costs tend to justify the means if utilised properly.
• Direct accountability. Having your own delivery service means taking full responsibility for any wrong, messy, or cold orders. Third-party deliveries often offer vouchers as compensation. Your business needs to determine how to manage bad experiences.
• Limited consumer diversification. Regardless of the majority of orders done directly through the restaurant/food retailer, you would still miss out on new potential customers who may be able to discover your business through the third-party’s platform reach.

Third-party delivery services such as UberEats, DoorDash, and SkipTheDishes have revolutionised the food delivery industry, disrupting traditional dine-in and self-managed deliveries.
These services enable your business to outsource the delivery service while operating independently from your company, without requiring restaurants to pay up for any of the required delivery resources. While this may sound like a no-brainer, there are reasons you need to consider before deciding to jump in.

• Greater discoverability. If you’re a small business or startup, then third-party delivery services may be able to shed light on the goods you offer through the reachability of their platform. You instantly gain traction from their already-established audience.
• Outsource the worry. Delivery taken care of by a third party enables you to focus on the core of your business, such as strategic planning or identifying market growth opportunities. These third-party service companies tend to be well-versed in experience, expertise and resources, which are delivery factors you don’t have to worry about.
• Seamless integration with low upfront cost. Most third-party delivery services like Uber Eats and DoorDash streamline getting your business onboard to their service. Setting up processing and commission fees (including paying drivers/couriers), enables the low upfront cost.

• Margin-cutting fees. Despite the low upfront cost, every delivery requires a steep portion (around 30%) of the revenue per meal delivery to these third-party delivery companies, significantly cutting your profit margins.
• Highly competitive. Despite the vast exposure to consumers on the third-party platform, this also means other restaurants or food retailers are on the hunt as you are. Standing out on these platforms has proven difficult when you’re in a sea of hundreds, if not thousands, of alternatives your consumers can easily go for.
• Lack of control over delivery experience. Since you’re outsourcing the delivery aspect, this prevents you from determining how you want your food delivered to customers or having any say in how staff training is conducted.

There is no such thing as the best alternative, only the suitable alternative for your business. In-house and third-party delivery systems have their ups and downs, but ultimately, it comes down to which best suits your business needs in the short and long run with the right guidance and analysis.

That’s where Lab42 can help to ensure you make the best decision. After all, it’s businesses that make informed decisions that stand the test of time.

Learn more about how Pandabox can turn your business’ food delivery painpoints to solutions.