Disruptions that Disrupt
While the pandemic causes disruptions in our daily living, it also helps accelerate the pace companies adopt technologies from accepting cashless payment, digitising their process flow to using technologies to engage customers. Without due considerations, decisions taken by business owners to hop onto the digital bandwagon might be detrimental in the long run.
Let’s look at Food Delivery services, which many of us might use to continue our little indulgence during the Circuit Breaker or Lockdown — ordering food from a restaurant that we used to patronise or a cup of bubble tea.
There are generally two types of food delivery services: Restaurant-to-Consumer, which the restaurant might own the apps, and Platform-to-Customer, GrabFood, FoodPanda, Deliveroo and similar. What are the key differences that these are making to restaurant owners?
The Restaurant-to-Consumer model allows the restaurant to manage the ordering and delivery of meals to the customer directly. The restaurant might commission the platform’s development or an independent platform that links the customer directly to the restaurant. The most crucial aspect of this model is that the restaurant owns and manages the customer relationship.
For the restaurant owners, it’s a challenging task to develop their platform as it takes a much longer time and higher cost compared to getting onboard a delivery platform. Unless they already have their platform before the pandemic or are a group of restaurants leveraging on their numbers to commission this development.
The slower pace of business is an advantage upon implementation as it takes time to fine-tune both the processes and the platform. The platform will serve both the needs of restaurant owners and its customer, and one shouldn’t expect it to work perfectly upon commissioning without any issues and refinement.
The Platform-to-Consumer model focuses on online delivery services that provide customers with meals from partner restaurants. The platform will manage all the ordering and delivery processes. The platform allows the restaurant to list themselves on their platform, making their food available as a product on the platform. Customers are own and manage by the platform.
These delivery platforms typically take approximately 30% of topline sales, which is a very high quantum considering the profit margin of an F&B. To make it attractive for the customer to order, a restaurant might need to lower their price, cutting further into their profits, while continuing to pay for the 30%. Customers typically do not see the restaurant URL or branding as the branding are being done by the platform. In time to come, the restaurant might lose its customers to the platform while continuing to work for the delivery platform.
While this presents an issue, it might be better than the case of “Out of Sight, Out of Mind”. After the pandemic, customers might only continue with those that they are familiar with all these while. Besides keeping the business alive and being present, it is also to retain the customer, which is essential post-pandemic to continue moving forward. Else, a restaurant might be investing more resources to acquire new customers and building loyalty.
A delivery platform also helps to drive traffic, creating awareness of what a restaurant is offering. However, you might be one of the many that are listed on the platform. Unless a restaurant has solid branding to drive its customers to a specific platform, restaurants are fighting to attract attention. When one is a restaurant with a unique offering and proposition, it might create a deterrence to the delivery platform to introduce similar food type from competing restaurants.
Apart from competing restaurants, another segment is gaining popularity fighting with traditional restaurant owners, those private labels operating from Ghost Kitchen. Those who own the customer information and purchase pattern has a great advantage to operate a Ghost Kitchen — capturing a local market segment, maximising sales, reducing the time from kitchen to table, and reducing the cost of Last Mile Delivery.
While it seems that there are many detrimental factors to list on the delivery platform, it’s a step that one cannot avoid to generate revenue and keep the business alive. At least for the short to mid-term.
Restaurant owners might be in a love-hate relationship with the delivery platform that they list their food, regardless of their operating model. On the one hand, restaurant owners need to reach out to the customer to sell their food but worried that they might not return to dine-in in the future.
As a customer, will you prefer a dining experience, or you can make do with just having this indulgence at home? Will you continue to support a restaurant and give a miss to competing brands or whatever that offers the lowest cost?
There isn’t a simple solution for restaurant owners to adopt or not to adopt this disruptive approach. One will need to consider different factors and different aspects of their business before reaching a decision and fine-tuning towards their goal.
References
https://www.eater.com/22228352/convenience-of-delivery-apps-destroying-restaurants-uber-eats-doordash-postmates
https://wavicledata.com/blog/food-delivery-who-owns-the-customer/
https://www.channelnewsasia.com/news/business/covid-19-food-sector-delivery-apps-lower-commission-fees-1264325
https://blog.hubspot.com/service/importance-customer-service
