Search Engines for the City
How on-demand delivery rewires local commerce
On-demand delivery is now a fixture in urban life. Delivery platforms are increasingly the gatekeepers between merchants and their customers. As they continue scaling, they’re changing the nature of local commerce and the way cities themselves work and grow.
Over a Decade of Delivery
On-demand delivery came onto the scene roughly fifteen years ago. Ele.me (China) launched in 2008. Postmates (U.S.), IFood (Brazil), and Delivery Hero (Germany) all started in 2011. Over the following years, even more platforms were founded and companies like Grubhub and Uber launched delivery units as well.
Delivery platforms now operate in every major city on the planet. They are ubiquitous and they are reshaping local commerce as they continue to grow.
Living Through a Looking Glass
Delivery platforms influence how new customers find new merchants. In our post-delivery platform world, in-app placement matters at least as much as a marquee or façade. It's sometimes even as important as physical location. If you’ve ever ordered delivery from somewhere you’ve never physically been to and otherwise would have never known about, you should have some idea.
Platform-based commerce has also scaled up enough to support new types of businesses. Virtual brands are merchants (mostly restaurants at the moment) that only exist on platform – they have no physical location for customers. They might be a legacy restaurant testing a new menu or a standalone venture optimized for delivery. Either way, they only exist through the looking glass of a delivery platform’s app.
Ghost kitchens are a related concept. They’re food prep sites that make orders exclusively for delivery. This is where we see platforms most clearly reshaping cities.
Ghost kitchens change the distribution of demand for commercial space. These facilities aren’t concerned with foot traffic or parking for a dinner rush. And because they’re only kitchens, they can be as small as 200sqft. What matters for a ghost kitchen is proximity to where customers want to receive delivery. This makes locations within striking distance of high demand residential areas more attractive (as opposed to places with reliable foot traffic or easy car access).
Everything, Everywhere, All the Time1
While most of our story to this point has been about takeout, the impact of delivery platforms is much wider. These businesses all want to become the Next Big Super App2, brokering the sale of everything there is to sell. Eventually, delivery platforms will be indistinguishable in terms of what categories they deliver (takeout, grocery, retail, convenience, pharmacy, etc).
As the platforms expand into other categories, they’ll change what we build, where we build it, and the demands on real estate in cities everywhere.
If we’re thinking about how much impact platforms will have (and how quickly they’ll have it), we have two open questions:
How much will the app-based share of local business grow relative to IRL shopping?
What’s the tipping point for other types of businesses to change the way they sell and warehouse goods?
The specific answers here are unclear, but there’s no reason to think we won’t keep trending in the direction of more platform-based local commerce.
First, the factors that brought us this far aren’t going away. Amazon will continue training consumers to expect delivery. They’ll also continue burying legacy retailers. This will keep pushing legacy businesses to provide delivery. For most retailers, that will mean using the infrastructure provided by delivery platforms.
Second, the future will be more favorable for platform intermediated commerce. Ubiquitous drone delivery (whether by land or by air) will be a pull factor. As automation reduces delivery costs, it will help these businesses scale by lowering delivery prices and making a wider range of (lower margin) goods feasible to deliver.
Life Imitates Art
Exactly how the future of local commerce plays out will depend on more factors than I’ve included or even imagined here. There is, however, a larger lesson worth calling out.
Once upon a time, Google helped users make sense of the internet. Nowadays, SEO optimization exists to help the internet make more sense to Google. The internet contorts itself into the shape Google prefers because Google is what 90% of humanity uses to access the internet. As delivery platforms become the search engines for physical goods, they’ll exert a similar effect on cities.
Granted, atoms rearrange themselves more slowly than bits. The cost of optimizing content for Google is also lower than reconfiguring the built environment for local delivery. That said, the point still stands. New technology, built to help us deal with the world as it is, often reshapes the world around it once it’s achieved sufficient scale. As we consider the development of cities, we’d have to recognize the impact of any technology or business model as ubiquitous as delivery platforms have become today.
Not to be confused with Everything, Everywhere, All at Once which you should go watch. Michelle Yeoh is a treasure.
Super apps are already the norm in Mainland China; in many ways other delivery platforms are following in their footsteps.