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Online food deliveries are expected to grow to $1.85 trillion by 2029 – and that’s literally good news for no one, from restaurants to everyday foodies. Seriously, the web2 food delivery industry is one of the most broken things out there, a prime example of a middleman swooping in to make things harder for everyone. Coincidentally, this creates a perfect use case for web3 and decentralized physical infrastructure networks, more precisely, with web3 becoming the core of a service used by billions of people around the world.
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The vicious circle
What exactly makes food delivery so horrible, you might ask? Well, it all comes down to cost.
Think about this: your everyday multi-restaurant delivery app would charge a fee of up to 30% for its services. This fee must be paid by the restaurant and covers the use of the platform and, optionally, things like marketing and promotions. The problem, however, is that while restaurants often operate at a 2x to 3x markup, this is to mitigate their extremely high overhead costs. When you’re so desperate to hang on to your solvency, anything that reduces your profits, like delivery app costs, will hit you hard.
The immediate solution is simple: pass these costs on to the buyer. Delivery will cost you about 20% more than dining in, which doesn’t sound nice, right? Well, delivery companies think so too, which is why restaurants are often strict about keeping the prices you see on the app consistent with what you would pay on site. This obviously does little to solve the original problem, and so the usual outcome is that prices simply go up across the board, both in the app and where you dine.
Naturally, users are not very happy with the walks, and that is understandable, because for a little convenience they have to pay quite a disproportionate bill. So they do the reasonable thing: they reduce the use of delivery apps. In fact, they also eat out less, which further increases the pressure on restaurants. The couriers, or “partners,” as the apps prefer to call them, also have little reason to rejoice, as they don’t exactly get the lion’s share of the services.
The final act of this drama brings us to the delivery services themselves, which hardly make any money. Locked in a bitter battle for market dominance, companies spend countless billions on marketing, promotions, discounts and anything else that gets them more users. It truly is an industry that is at war with itself every step of the way, which is a clear sign of an unsustainable business model.
The web3 solution
The above is a good example of how much chaos and misery an intermediary can create by interfering between the supplier and the buyer. Should this mean that we should forget about our well-deserved Friday pizzas? Well no. We just need a more sustainable business model behind the app that delivers it. And DePIN is exactly the model the industry needs.
For all its key stakeholders, from restaurants to stay-at-home customers, the DePIN-powered delivery experience would be largely the same. You still log into the app, browse the menu, order what catches your eye and have it delivered by an independent courier. The main difference is that you don’t have to pay as much because there is technically no middleman.
Rather, what there is is a decentralized marketplace where restaurants offer real goods directly to customers. Instead of the huge costs of a web2 platform, they only have to pay DePIN’s network costs, which are significantly lower. This allows them to offer food at lower prices without sacrificing their profits; these are likely to increase.
On the other side of this equation are the users, who can enjoy the same food at lower prices. This encourages them to use the service more often, further increasing the restaurants’ income. The couriers also benefit from this and earn rewards for deliveries through transparent and reliable smart contracts. And of course, in the best Web3 traditions, the community, including all stakeholders, can have a say in how the service works through token-based governance. This community-focused growth model, along with lower prices, spares the project the need for a bloated marketing budget, but lets the service speak for itself.
With the rise of DePIN, the world is at a pivotal moment: a moment when Web3 has a real opportunity to make a real impact on the way we do some of the most everyday things. The food delivery industry is a perfect use case here, with the Web2 middlemen creating an unsustainable vicious cycle, and the DePIN model gives it the opportunity to break the cycle and reinvent itself in a more sustainable way. The opportunity is there, and things are cooking: it’s time for the big change.
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This article was co-authored by Max Thake And Bas Geelen.
Max Thake and Bas Geelen
Max Thake is co-founder of peaq, the layer-1 blockchain for DePIN and Machine RWAs, and EoT Labs, a software development and incubation organization that supports open source projects focused on the economics of things. Max is also a Fellow of the Sigma Squared Society, a global community of founders under the age of 26.
Bas Geelen is a senior marketer at Bistroo, a food delivery and takeout restaurant DePIN, where he leads innovative marketing strategies to take Bistroo’s brand to the next level in blockchain and food delivery. With a master’s degree in strategic consultancy, Bas combines his analytical expertise with a creative edge as a film producer and blockchain brand designer. His diverse skillset and strategic insight define Bistroo’s unique positioning in the market, making decentralized technology accessible and attractive to a broad audience.