The food and beverages (F&B) consumers are undisputedly moving their transaction process online ... preferring the ease and convenience of ordering via their smartphones instead of more traditional methods. In the light of this trend, there has been a substantial rise in the number of online food delivery providers seeking to capitalise on this potential.
For people looking to order their next meal, delivery provider apps give them access to a host of benefits — they grant users a platform to effortlessly make orders from smartphones, fine-tune search results, pull up their previous order information, make payments and even track their delivery driver’s position in real time GPS.
Restaurant operators are well aware of this factor when considering their own operating models and now need to consider the potential in partnering with online delivery providers. While delivery providers present a variety of benefits, they also come with an assortment of considerations and thus making them something of a double-edged sword for F&B operators seeking to partner with them.
Home delivery providers essentially operate in one of two models. One model approaches restaurants that already possess fleet services and offers exposure to their online audience by listing the F&B merchant on their app platform. Alternatively, some providers offer complete home delivery logistics solutions to restaurant operators who simply cannot afford to do so in their own facility.
The benefits of partnering with delivery providers in either of the above scenarios is the potential for increased customer exposure, better market coverage and growth in customer awareness, all essential factors to ensure a secure market position for restaurant operators. In the case of a complete home delivery logistics model, they also remove the hassle of hiring and managing one’s own fleet, which is a huge undertaking. Do not forget that finding competent reliable drivers in the market is not easy.
However, despite the proposed gains in implementing a third-party online delivery model, some restaurant operators have been hesitant to partner up despite the increase in accessibility. One of the biggest factors has been the cost.
Herein lies the primary issue as the best performing deliver providers will charge anywhere from 22-35 per cent, which isn’t just eating into margins but digging into them considerably. Another issue lies in the platform itself.
Despite paying a considerable fee, restaurants now find themselves competing online with other restaurants that have also signed up on the same delivery provider platform. This pushes them to another level of competition in a digital landscape where some operators find themselves having to further consider issuing promotions and discounts for an online audience.
So the question posed is are delivery providers in demand because they provide a valuable service? Or is it simply imperative to partner with such service providers in today’s market to survive?
The current climate and competition levels are dictating players’ actions. To remain competitive, restaurants either have to jump aboard or remain ill-equipped to meet the market’s delivery needs. Restaurants are desperate for any revenue, which in some cases is better than nothing at all. And F&B operators will partner up with delivery operators regardless of margins just to stay afloat.
With the food delivery market in the GCC currently valued at over $300 million (Dh1.10 billion) and a year-on-year increase in online ordering, it’s clear that there is a lucrative sector that simply cant be ignored. The bottom-line is that all players need to react to customer demand and that is the single driving force that has given rise to third-party delivery providers.
They fulfil a need that many F&B operators simply can’t afford to do themselves. While the margins may seem staggering, the value in partnering with such providers comes down to how much are today’s restaurant operators willing to pay to tap into this market. In addition, F&B operators also need to consider if opting to not pay these margins is even a viable option anymore.
— The writer is Managing Director of Glee Hospitality Solutions.