Cost to Develop on-Demand Application [Features and Estimates Inside]

What is an example of successful on-demand delivery app development?

On-demand service apps let users order services when they need them.

Uber is the best example of an on-demand apps service.

Uber is not:

• an on-demand service app replacing old-fashioned taxi companies in the transportation market.
• a transport company.

Uber is a technology company providing exemplary services via effective technical solutions.

Since 2009, Uber has gained considerable traction in various business domains.

The name is almost ubiquitous. Analysts and entrepreneurs even call on-demand delivery services ‘Uber for X’ where X is the name of the industry.

From courier or pizza delivery to hairdressers and babysitters: services available as soon as you need them.

This is exactly what on-demand service does.

Other known on-demand services include: Lift, Serviz, Airbnb, italki, Instacart, Deliveroo. There are many successful startups.

IT Craft’s expertise in making on-demand delivery apps

What makes on-demand delivery apps different?

What functionality does a typical on-demand delivery business need and how does it differ from other digital service solutions?

Every Uber-like application contains only four steps for both clients and service providers:

That’s it. Four easy steps make users’ lives easier and more pleasant.

These steps determine the functional core and technological stack used for the application. These four steps are not straightforward when developing your on-demand
application. They directly affect costs to develop an on-demand food delivery app.

Why? Because there is an immense amount of intense behind-the-scenes work completed by many parties.

Types of on-demand apps

On-demand delivery apps depend on their focus.

This can be an aggregator which collects offers from single businesses (e.g., DoorDash, Uber Eats). Or this can be a platform / an alone-standing app which is owned and operated by a certain business (e.g., Walmart+, Domino’s).

Aggregator.

Provides third-party platforms where customers and businesses meet each  other. Users get access to available offers. They can pay safely and track order execution in real time.

Businesses receive functionality for order management and access to analytics. They can integrate aggregator’s API to their app and save on the delivery fleet.

Aggregator is responsible for timely delivery.

Platform.

Business giants, such as Amazon, Walmart, and Domino’s, have their own custom platform for fast grocery/food delivery.

Amazon Fresh/FreshDirect are special apps deeply integrated into company businesses. With these large businesses, the apps provide a limited service—that of an aggregator—just getting people to order. The company owning a custom on-demand platform is responsible for a correct order and timely delivery.

Alone-standing app.

Small businesses can also benefit from an on-demand delivery app. In this case, the business is responsible for the entire order management process and delivery logistics.

Of course, small businesses determine their specific delivery and pricing terms and how to serve their customers more effectively and most efficiently.

Pros of aggregator lie in its low costs for food businesses.

Pros of custom platform/app lie in their independence from technical flaws or sudden change of an aggregator’s policy.

User statistics by age

On-demand delivery solutions enjoy constant revenue growth, increasing from $8.7 billion to $ 26.5 billion from 2015 – 2020.

On-demand apps target a wide audience. Are there user groups that enjoy on-demand delivery more frequently than the other?

Millennials and Gen X enjoy both delivery and takeout the most. Still, all user groups have started using on-demand delivery apps more often.

The statistics below show ordering based on generation:

Source: Deloitte

Did lockdown affect the current situation with rising interest in on-demand delivery?

Yes, it definitely contributed to a habit shift. Convenience marks one of the main trends. And there’s no turning back time: 46% of consumers do not plan to return to pre-COVID-19 habits.

On-demand market trends

The on-demand services market keeps changing apace to meet challenges. Services hope to reach and convert as many users as possible to frequent customers. This is the only solution for them to become profitable and survive in the long run. For it, they must offer greater convenience.

Best food delivery apps share same or similar ideas striving to please their users. The following trends are common for the majority of them:

• Expansion through merge and acquisition. Businesses enter new territories, markets, and niches by buying out successful competitors and gaining access to both business
  processes and customer base.For example, Caviar, a haut-cuisine delivery service, is now a part of DoorDash.Just Eat Takeaway acquired GrubHub to set up a presence in the
  US market.Many smaller businesses announce merges hoping to expand either horizontally or vertically.
• Delivery subscriptions
  Retaining users remains a challenge for many services. Users download and launch several on-demand delivery apps while looking for the best deal. The reason: delivery prices vary greatly for the same order. Users need to do their math applying delivery conditions and looking for special discounts to figure out the best deal for them.Delivery subscriptions offer predictability for both on-demand delivery services and end users. It’s a win-win. Users get a set delivery charge. Services get a regular income plus the likelihood subscribers will order more often.
• Last-mile delivery optimizationBoth delivery timeline and price remain a challenge. On-demand delivery services do their best to expand service availability
  (=user base). Most food delivery services set a one-hour delivery. Uber Eats offers a 30-minute delivery.Users who live beyond the one-hour-delivery zone cannot enjoy
  online orders.Not yet anyway.Services that deliver on bikes, motorcycles, and on-foot might provide lower delivery prices, but limit delivery size and weight.
• Accessibility only from onlineDark stores and ghost kitchens belong to this trend. On-demand services offer users grocery and food available only online. No customer
  brick-and-mortar store.For this, on-demand deliveries usually cooperate with food and/or grocery businesses (e.g., restaurants and supermarkets).This trend serves two purposes at once:
  • Reaching out to areas with an exclusive offer where there is
    high demand
    and no delivery options.
  • Helping businesses start for minimum-to-no upfront investment,
    thereby
    establishing exclusive cooperation.
• Services expansionNo one is surprised when on-demand services with similar specializations merge (e.g., grocery delivery and food delivery). However, many go beyond it, e.g., Glovo. A Glovo courier makes a purchase in the name of a user. This allows everything to get delivered. Even deliveries between two app users are possible.Other on-demand delivery businesses try including pharmacy, beauty, and other kinds of deliveries.Another example, Walmart offers on-demand delivery as a part of its Walmart+ program. Users can choose grocery and many
  other kinds of products available through brick-and-mortar stores.
• Multiple delivery within one order. A grocery shop is seldom the only place a user visits with a shopping list in hand. Users benefit from one harmonized delivery that picks up orders from several places. Combining several orders into one—delivery cost saves time, effort, and money for a user.So, another task for on-demand delivery businesses after their expansion to other domains lies in organizing effective courier logistics, so end users get all their orders at a lower delivery price.
• Ownership over deliveryThis trend is crucial for food businesses. When the COVID-19 pandemic broke out, many food businesses were caught off-guard.Businesses that had considered online on-demand delivery apps only as an extra source of revenue before COVID-19, were unprepared for high processing costs. But there was no other option as long as clients were not allowed to come in person.The trend for ordering food online remains today. For food businesses, a branded on-demand delivery lets them retain control over processes and manage delivery costs and quality.Owning an on-demand delivery app also helps a business avoid any dependency on third-party providers and their policies.

Benefits from using on-demand apps for businesses

For anyone sitting on the fence, know this: the on-demand service market keeps growing. Why? Users like them. On-demand services are convenient, predictable, and affordable.

What’s in it for businesses? Below are the main benefits:

• Access to a wide audience. For many businesses, an app helps them expand. For example, only people who have time can visit a store within its working hours. But those who do not can get their order delivered at a convenient location when ordering online.
• Improved quality of services. Apps dramatically decrease sales time by removing uncertainty. With a glance, users can see what they are ordering. They can check product availability and convenient delivery hours. Or easily book an appointment and get a reminder.
• Cost optimization Managers spend less time handling and confirming customer orders. The same team can cope with an increased number of orders. This reduces costs due to increased accuracy.
• Staying competitive. In 2021, online presence is not an option. Do it or lose competition. Fortunately, on-demand services make it possible to establish online storefronts without huge investments. Businesses can start competition just in 10 – 15 minutes when signing up for an on-demand marketplace or in 2 – 3 months when launching their own on-demand
  delivery app.
• Comprehensive analytics. A good on-demand delivery app generates different kinds of reports. Businesses do not need to spend much time gaining insight on user activities, popular categories/items/services. The app helps formulate a data-driven strategy.
• Flexibility. With detailed analytics, decent marketing strategies become real. Businesses can make more accurate recommendations. They can retain customers by providing personalized offers based on users’ tastes and habits.And, on-demand fits in well with many types of businesses—anywhere users need a product/service instantly or at a certain time point.

Businesses that use on-demand apps

The list of possible on-demand services is almost endless. Any consumer service can be connected with its customers via an on-demand app.

Below are the most required services:

• Food and grocery delivery

  Order specific cuisine, beverages, grocery, alcohol, and much more. Get it delivered within one hour or sooner.

• Taxi and transportation

  Reach a destination point with minimum hassles. Provide transportation services right when users need it.

• Rental

  Find a vacation house for the best price. Help renting a car, yacht, or plane at a desired location.

• Learning

  Connect learners with the right professionals. Provide functionality for successful online learning such as video calls, electronic dashboard, tools for making exercises, etc.

• Home services

  Find a professional with required skills: plumber, electrician, carpenter, etc. Negotiate on price and time, schedule a visit, and get the job done.

• Beauty

  Book a time or schedule a home visit by a beauty expert. Work on style, everyday look or prepare for a special occasion.

• Repair and maintenance

  Find a reliable professional who can repair or maintain a device. Get a preliminary estimate on defects and costs before visiting the repair shop.

• Pharmacy

  Get prescribed medication fast and easily, especially useful when a user is unable to go outside for medical reasons.

• Healthcare

  Book nursing time or a personal consultation from a doctor. Hire a qualified professional for a part-time or full-time job.

• Telemedicine

  Get an instant, qualified consultation from almost anywhere in the world. Share information securely.

• Logistics

  Find the best provider for a specific load to be transported. Negotiate on delivery terms and track delivery via the app.

What about the technical side of an on-demand delivery app?

Essential parts of an on-demand system

Complexity of work to be done determines cost. Let’s look at the main blocks of functionality that an on-demand application contains and how they affect costs to develop an on-demand delivery business.

An on-demand solution includes four important parts:

Mobile app for users – helps customers access the service

Mobile app for service providers (e.g., drivers, couriers, managers) – provides functionality needed for order management

Server part – used for data storage and processing

Admin panel – lets control actions and processes

As mentioned above, a standard Uber-like, on-demand service app must provide enough functionality for the following user activities:

• Place and accept a request. (Depending on the nature of the services the app
  provides, it could be a trip, pizza delivery, or massage.)
• Send notifications to all parties.
• Determine geolocation to make a meeting possible.
• Make payments in real time.

Key system features include:

Crucial features of an on-demand app

Let’s consider a feature list in greater detail. An on-demand app is impossible without the following features:

• Geolocation

  

  Geolocation is significant. When users order a taxi or a courier to an exact point on the map, the location must be determined as precisely as possible. Positioning error cannot be too significant. (Of course, it depends more on the user device than on the application itself.) Map integration is also necessary, as the point with coordinates must be translated into an address.

  The app then builds the route to the final address. The map provider is very important here: quality of the navigation service is crucial for timing. Optimal route planning decreases time the driver/service provider needs to get to the client—if it’s a one-way road or not, if the house or building has a road to its main entrance or not, where the driver can make a U-turn, etc.

• Notifications

  

  There are two types of notifications:

  • The service sends notifications through the cloud and stores them there.
  • The app receives notifications from its server and displays locally.

  There are several restrictions for sending notifications via the cloud: the cloud does not guarantee delivery. Delays are possible. This is critical when the user receives a notification on the arrival of a taxi.  If the notification does not appear or the user misses it, payment for the failed trip/service must still be paid.

  To send updates to the applications in real time, we recommend using your own socket server for an on-demand app like Uber.

• Payment transactions

  

  Security is a must have for an app where users make and receive payments.  To secure both user data and service provider’s money, the app needs an additional “layer” between them―the platform. In this case, users transfer money. It goes first to the platform. When everything works out well, the money then goes to the service provider. If not, the money is refunded to the user.

  When users add tips to the amount of the order, service providers receive money directly onto their accounts.

Costs to launch an on-demand delivery app

Check out the number of working hours needed to perform an activity on a typical ‘Uber for X’ project. We use a taxi service as an example.

Please note that all numbers below are in a range. Every development project might present unforeseen challenges even after the team has determined all requirements. Be prepared for flexible budgeting.

Do you want to calculate costs to develop an on-demand delivery app?

Multiply hours needed to launch an on-demand app by developer’s hourly rate.

Below is a table with hourly rates depending on the region:

Let’s apply the average Central/Eastern European hourly rates, $50 – $55. Costs to develop an on-demand delivery app containing fully custom, robust functionality would range between $133,500 and $204,600.

Cutting down costs to develop an on-demand delivery app?

Building an on-demand app is expensive. Can app development for startups be less expensive?

Yes, they can.

Focus on the following points:

• Thorough preliminary study.The on-demand services market is full of various offers. Most likely there is even an app for your idea. Before you start, plan. Nail down what makes users unhappy about current solutions, what you can do better than your competitors do. Test user interest. Are they really willing to switch to an alternative app?
• MVP development.Start with an MVP. Costs to build an MVP are lower than those for a fully featured app because MVP development focuses only on the core feature list. Moreover, you will need to improve your product as soon as you get feedback from real users. It is less expensive with an MVP.
• Choosing an experienced development team.A reliable development team is one of the key elements of a perfect launch. Choose the team that has already successfully launched on-demand solutions. Such a team might ask for higher rates but would work faster than an inexperienced team. Do not accept an unreasonably low-cost offer.
• Apply for engine-based app
  development.Cut costs dramatically. An on-demand delivery app can cost you only a fraction of a huge budget when the app is based on a pre-prepared package. How is this possible? The engine contains ready and tested key functionality of an on-demand app. The team only needs to focus on design, customization, polishing, and launch.
• Focus on user retention.Focus on customer satisfaction instead of fast growth. Exponential growth requires immense investments in both marketing and technology. When your
  app does not meet user expectation, they will abandon it and find a better solution in the market. Wasted investment of time and money. Scale when you are ready.

Development stages of on-demand delivery apps?

Usually, development of an on-demand app includes three phases:

Analysis phase – The client has stated expectations. The development team determines requirements and formulates them in a technical document―software requirement specification (SRS). This document contains a complete and clear description of the product being developed.

SRS helps:

• Development team

  • – Provides more accurate estimates of the costs, risks, and timeline.

• Customer

  • – Clearly formulates vision and ensures the development team understands the core idea.

• Both parties

  • – Identify optimal set of functions.
  • – Optimize development process, minimizing time spent.
  • – Prioritize problems to solve them easier and faster.
  • – Understand which results would be optimal during testing phase.

During this phase, a Business Analyst or/and Project Manager work side by side with the customer to create an SRS to be used later by developers and QA engineers once implementation starts.

With an SRS, it is much easier for the designer or business analyst to create wireframes for a future piece of software. Wireframes provide a low-detailed representation of the future design—a skeleton of the design. Wireframes clearly show the information structure, describe user interaction with the app, and its approximate visualization.

Implementation phase – during this phase, developers code the required functionality. For a mobile application like Uber, we believe―and recommend―taking the native approach.

This means a team of iOS developers develops an iOS application using Swift language while another team of Android developers prepares an Android application using Java or Kotlin. Also, a separate web development team implements the Admin panel and server side of the project.

Testing and stabilizing phase – QA team checks whether the freshly baked application operates correctly under predetermined conditions. Manual or automated testing depends on the project size.

After the QA team reports bugs to project management or a bug tracking system used, developers start working on polishing and stabilizing reported issues to ensure the application works well and seamlessly.

Project management – Project manager assigned by IT Craft is responsible for entire communication with the product owner. The PM plans sprint tasks for the team, gathers, and sorts out the requirements.

The project manager determines how many software developers, designers, mobile developers, and other IT specialists the project needs. The PM also focuses on preparing and verifying project documentation, risk analysis, and coordination of schedules.

The PM does whatever it takes to make every sprint and the entire project a huge success.

Specifically, project managers monitor project performance by gathering status information about the following:

• all changes to baseline data
• changes in management information
• progress activity with status details
• list of complete and incomplete deliverables
• activities initiated and finished
• estimated time to completion

The project manager also organizes and systematically oversees reviews of quality management on the project. There are a lot of monitoring activities on the project performance.

Once the application is complete, it goes live—to the Apple Store and Google Play market.

To sum up:

An on-demand, Uber-like app is a decent tool for an audience to get the services they want, when and where they want them.

For service providers, the app opens access to a wide audience.

An on-demand app is a product of teamwork. It requires a development team who provides mobile app development services based on previous experience and an established workflow.

This makes it possible to prepare reasonable estimates and keep up with promises.