Ando acts like an ordinary restaurant. There’s a counter where you order cheesesteaks and banh mi, a fridge stacked with grab-and-go salads, and a row of stools looking out onto bustling 14 Street. You can sit on one of those stools and eat an entire bowl of chili-glazed wild salmon and quinoa without knowing the most important thing about Ando: just a month ago, it was a delivery-only app.
At first glance, online food delivery looks like a promising area. Delivery traffic excluding pizza has risen by double-digits since 2012, and the market is expected to surge by 79% in the next five years. A commanding 82% of restaurant brands tracked by L2 offer delivery via category leader GrubHub, which processes over 300,000 daily orders.
But even as tech giants including Facebook and Amazon take steps to enter the lucrative market, smaller delivery services – once hailed by investors as the next big thing – are struggling. SpoonRocket, which prioritized quick, cheap delivery over quality, shut down last year, and competitor Sprig closed in May. Maple no longer operates in New York, instead pairing with the UK’s Deliveroo; Munchery is cutting staff in a frantic bid to survive.
Ando is trying a different tactic: pairing its mobile delivery app with old-school brick-and-mortar. Launched last year as a delivery-only service, with $7 million in Series A financing and famous backers including David Chang, Aziz Ansari, and Jimmy Fallon, Ando opened its brick-and-mortar restaurant in New York’s Union Square area earlier this month. The restaurant kitchen serves as a hub for delivery, but otherwise is separate from the delivery operations, although there are plans in the works to let customers pay with the Ando app.
“I don’t think delivery-only is viable right now,” Ando CEO Andy Taylor told me. “The costs are high, and a big portion of the population is still uncomfortable with getting food out of thin air. They want to see who’s making it, how it’s made. Food is emotional. You’re not buying a DVD.”
Taylor, who previously occupied the CEO role at Hale & Hearty and led operations at Pret A Manger, is intimately acquainted with the challenges of the quick-service world. But Ando faced a different set of obstacles. Even if the company could master the logistics of delivering fried chicken that remained crispy half an hour after exiting the fryer, the app would suffer from the same problem as its shuttered competitors: a lack of visibility.
“If you’re walking past a store every day, that brand sticks in your mind. But as an app, it’s hard to be present in people’s minds,” Taylor said. “You have to pay for it – paid media, Instagram. And that can get expensive.”
Renting a physical storefront might be a superior investment, at least for Ando. In the first two weeks the restaurant was open, two-thirds of meals were purchased there; only a third were deliveries. But the physical business is also boosting the digital one. On the day I spoke to Taylor, he mentioned that the previous day’s delivery numbers were up 15% over the previous Monday.
Ando’s pivot to brick-and-mortar is part of a larger shift, as digital-only retailers realize they might need physical outlets after all. Everlane, whose CEO proclaimed in 2012, “We are going to shut the company down before we go to physical retail,” opened its first permanent store earlier this year.
But while many retailers have tried to make the move from e-commerce to offline, success is not always guaranteed. Piperlime shut down in 2015; Nasty Gal declared bankruptcy last year. Bonobos was one of the successful few, connecting its online and offline businesses so effectively that it was acquired by Walmart in June.
“We said we would never be offline, and then, wait a second,” Bonobos CEO Andy Dunn explained. “We hit a big turning point. We realized offline really works.”