High Costs Limit Food Delivery Market to 1% of Meal Spending

Nigeria’s food delivery platforms account for just one per cent of consumer spending on meals prepared outside the home, significantly below the estimated five to seven per cent recorded in comparable African markets, as rising living costs constrain demand for convenience-based services.

The figure based on estimates by Swoop Limited, a food delivery company trails markets in South Asia and South America, where delivery platforms reportedly account for between 10 and 15 per cent of spending on prepared meals.

While the disparity highlights the challenges facing Nigeria’s food delivery industry, affordability, delivery charges and consumers’ spending power could determine whether online meal ordering becomes an everyday habit or remains an occasional convenience.

In an opinion article titled Beyond Convenience: What Will Drive the Next Phase of Food Delivery in Nigeria?, Swoop’s Country Manager, Demola Adesina, argued that the industry’s growth would depend less on the availability of technology and more on whether consumers could afford to use the services regularly.

According to him, the appeal of ordering meals online has not necessarily translated into widespread adoption because customers must weigh the convenience of home or office delivery against the additional costs involved.

Consumers can choose to order through an application, visit a nearby restaurant, buy from local food vendors or contact their preferred eateries directly. These alternatives, Adesina noted, place delivery platforms in competition not only with other technology companies but also with established ways of purchasing food.

With households facing competing demands on their incomes, customers may appreciate the time saved through delivery without being willing to pay a substantial premium for it regularly.

Adesina said promotional discounts could encourage first-time orders, introduce customers to restaurants and improve familiarity with delivery applications. However, he cautioned that discounts alone would not create sustainable demand if customers were unwilling to pay the normal price once promotions ended.

He said operators needed to focus on pricing, operational efficiency and service quality to convert occasional users into regular customers.

The economics of food delivery also involve restaurants and riders, whose interests must be considered alongside those of consumers. While customers seek affordable and reliable services, restaurants need to retain sufficient profit margins, and riders require earnings that justify the costs of making deliveries.

Adesina stressed that a business model that reduces prices for customers at the expense of restaurant profitability or riders’ earnings would struggle to remain sustainable.

He said the industry’s challenge was to establish a balance that allows consumers to pay reasonable prices while enabling restaurants to generate additional sales and riders to earn a living.

The opportunity for growth, he added, extends beyond existing platform users to consumers who order occasionally or have never used a delivery application because buying meals from nearby vendors appears more affordable or practical.

For Nigeria’s food delivery market, even a modest increase in adoption could expand the customer base, given its relatively low share of spending on prepared meals, according to the company’s estimates.

However, the extent to which that potential can be realised will depend on operators’ ability to offer services that reflect local purchasing patterns and income constraints.

Adesina maintained that affordability should not be measured solely by the lowest advertised price, but by whether customers can use a service regularly, restaurants can maintain viable margins and riders can earn sustainable incomes.

Meanwhile, the cited figures were presented according to the company’s estimates in the Nigerian market.