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The online food delivery sector is expected to reach a whopping $1.85 trillion by 2029. This growth is beneficial for everyone — from restaurants to food lovers. However, the current Web2 food delivery landscape is fraught with issues, primarily due to the interference of middlemen complicating transactions for all parties involved. Fortunately, this scenario presents a prime opportunity for Web3 technology and decentralized physical infrastructure networks, placing Web3 at the forefront of a service model embraced by billions globally.
The Problem at Hand
You might ask, what makes food delivery so problematic? It comes down to the fees involved.
Consider this: food delivery applications that partner with numerous restaurants can charge commissions as high as 30% for their services. This fee, borne by the restaurants, covers platform usage, marketing, and promotions. Unfortunately, many restaurants must implement price markups of 2x to 3x to offset their hefty operational costs. Consequently, any deduction from their already narrow margins, like delivery app commissions, can severely jeopardize their financial viability.
The immediate solution seems straightforward: passing these costs onto consumers. Meals delivered often come at about a 20% premium compared to dining in, which is far from ideal. In response, delivery services frequently require that restaurants match app prices to in-store prices, which doesn’t effectively address the core issue. As a result, both delivery and dining-in prices typically rise overall.
Understandably, consumers are displeased with these price increases, as they feel overcharged for the minimal convenience provided. Such dissatisfaction leads them to use delivery apps less frequently and dine out less often, placing additional stress on restaurants. The delivery drivers, referred to as “partners” by the apps, also see little benefit from this arrangement, leaving them with limited reasons to celebrate.
The final outcome of this complex situation? The delivery services themselves struggle to turn a profit. Engaged in a fierce battle for market share, these companies pour exorbitant amounts into marketing, promotions, and discounts to attract users. This perpetual competition is reflected in an unsustainable business model, highlighting the industry’s serious challenges.
A Web3 Solution
This scenario illustrates the mess that can arise from a middleman complicating transactions between providers and consumers. Does this mean you should give up on ordering that delicious Friday pizza? Absolutely not! What we require is a more stable business model behind these services, and DePIN provides just that.
Under a DePIN framework, the experience remains largely unchanged for all key players, from restaurants to home diners. You’ll still log into an app, check out the menu, place an order, and receive it from an independent courier. The key difference is the absence of a traditional middleman, resulting in lower costs.
In this decentralized marketplace, restaurants connect directly with customers, meaning that rather than facing the hefty fees of a Web2 platform, you only incur DePIN’s significantly lower network fees. This cost reduction allows restaurants to provide food at more reasonable prices while also enhancing their profitability.
Consumers will enjoy the same meals at better prices, encouraging more frequent use of the service, leading to higher revenues for restaurants. Couriers, too, will benefit, earning rewards for their deliveries through transparent, trustless smart contracts. Moreover, this grassroots governance model empowers community participation in service operations through token-based decision-making. This cooperative growth strategy and reduced prices minimize the need for excessive marketing expenditures, allowing the quality of the service to shine through instead.
The emergence of DePIN signifies a monumental moment. Here lies the chance for Web3 to genuinely influence our daily lives. The food delivery industry serves as an ideal case study, showcasing how Web2 intermediaries perpetuate an unsustainable cycle. The DePIN approach offers a path forward to break this loop and foster a sustainable future in food delivery. The opportunity is at hand, and the future looks promising. It’s time for significant evolution.
This article was co-authored by Max Thake and Bas Geelen.
