Article By : Rohit Sachdev, Managing Director at Soho Hospitality
I still remember when I was a student in University, more often than not, I would have one of those days where I was just too lazy to cook or dine outside. I would then give-in to the limited delivery options that were available to me – fast-food (aka Pizza) or Chinese. I would sit in my living room, clogging my arteries and wishing things were different with better options. Many years later, as it turns out, my wish has finally come true – the food delivery industry has become the next big thing!
Today, hungry city-dwellers are able to order and enjoy their favourite meals on their mobile phones from their go-to restaurants. Furthermore, restaurants once limited to in house guests are now able to expand and reach a larger demographic of consumers beyond their captive customers thanks to food delivery services in such as FoodPanda, Line Man and now – UberEATS. The concept of food delivery has aggressively swept in and created a huge ripple in the restaurant industry. And it is here to stay!
The food-delivery craze is as much of a thing in Bangkok as it is across all major metropolitan cities of the world. However, the potential growth of the business in a city like Bangkok has tremendous potential due to a number of contributing factors. A recent Mastercard survey of Asian dining trends people revealed that Thais and Chinese are the most likely to spend more on dining over the next six months with Thais coming second only to the Chinese in terms of eating out on a monthly basis, averaging 30 times a month. Secondly, Thais are slowly moving away from the street hawkers to casual dining restaurants and becoming more adventurous in terms of trying new concepts as their palettes are becoming increasingly sophisticated. Finally a recent edition of the Global Traffic Scorecard by Inrix declared Bangkok as ‘the world’s most traffic congested country’ opening the door for Bangkokians to order their meals through a touch of a button and enjoy a restaurant-quality dinner without leaving their homes or having to battle Bangkok’s notorious traffic after a long day’s commute.
According to an article in the Bangkok Post, Bangkok has the potential to reach 100,000 online food-delivery transactions daily in the next couple of years. In Bangkok today however, orders are still placed via traditional phone-calls to which Alexander Van Felde, co-founder & managing director for Thailand, Food Panda says “we still have a lot of ‘educational work’ to do to shift Thai consumers from phone calls to ordering online,” Talking numbers, ‘Statistical’ forecasts that revenue in the food delivery industry of Thailand would amount to US$254m in 2017 and is expected to show an annual growth rate of 25.6% resulting in a market volume of US$632m in 2021.
Although not at it’s peak, the food-delivery trend in Bangkok is already picking up. As more and more consumers with disposable incomes are demanding their favourite meals at home, the food-delivery industry is rapidly evolving and delivery service providers are in an all out war, battling to capture market share amongst their fellow competitors.
We are hearing all about what this revolution in the restaurant industry means for the market and the economy but what does it actually mean for you and me – the consumers? First of all, it means more options. More options to eat our favourite meals from our favourite restaurants in the convenience and comfort of our homes, more options for our pockets and more options for us health-conscious foodies. The food-delivery scene has made us even more spoilt for choice, so much so that we now base our restaurant choices on whether or not they’re able to deliver. The National Restaurant Association in 2015 showed that 61% of millennials stated that the ‘availability of takeout and delivery options are an important factor in choosing a table-service restaurant’, that was 2 years ago – imagine what the numbers would be today.
With so many third-party food delivery services providers out there (Seriously, where are they coming from?!), what sets them apart in the eyes of the consumer? A research by Morgan Stanley titled “The Pizza Paradigm for Online Food Delivery” stated that there are four key factors to choosing a food-delivery. Consumers are looking for affordable food-delivery options, the availability of delivery in their area and delivery time (In Bangkok? Sigh). Another impeding factor and perhaps the most important? – Food Quality. Morgan Stanley analysts say “Pizza has been successful because cheese is a good insulator and the product can withstand a 20-minute delivery journey. Other categories don’t fare as well.” As a result, there is a huge amount of pressure on food-delivery service providers to invest their efforts and resources in technology that ensures that the food they deliver is hot, fresh and of utmost quality. Sad to say, none of the food-delivery services have completely figured this out yet and are in competition to crack the code, we’re currently in a so to say – quality race.
There is now a huge shift in consumer behaviour, it makes me wonder, what does this mean for us restaurateurs? The food-delivery scene no doubt allows for us to reach more customers resulting in a spike in business and brand-popularity but what are the downsides? Will the rise of food-delivery cause restaurants to fall, killing the restaurant trade? Personally, I don’t think so. I believe that we are nowhere close to a point where restaurants will rely solely on food-delivery as there is still a huge demand of people wanting to dine in restaurants and enjoy the entire experience of storytelling. David Moore, successful restaurateur best known for the Michelin-starred London site Pied à Terre agrees with me as he thinks that although food-delivery is a great idea, it works by ‘exploiting people’s impatience’ by offering an option for people who ‘want to eat right now’. He believes that the two experiences, food-delivery and dining in can co-exist as they cater to different needs. He says “I don’t see people inviting friends round to their front room, to look through a Deliveroo catalogue,” he says, “When you go to a restaurant, you want the charm, the service, the conviviality. It’s about personalities. It’s not surprising delivery companies are doing well, as there is demand, but I’ll eat my hat if deliveries outstrip restaurants.”
However, this does not mean that we do not have anything to worry about. This coexistence presents its own challenges to us as restaurant operators. Our first challenge? – quality. The main challenge for both restaurants and third-party delivery services is to ensure that they are able to maintain the expected quality of the food as well as the standard of customer service. Once the food order leaves the restaurant, we lose control over when it reaches the customer and how. Any lapse in quality and presentation immediately reflects on the restaurant and not in the food-delivery service provider, the reputation risk is immense.
Another disadvantage of food-delivery service is the loss of connection between the restaurant and the customer. At Soho Hospitality, we believe strongly that everyone that enters our venues is taken through a journey of storytelling, we weave a relationship with each of our customers – a relationship that lasts even after they leave our venues, food-delivery deprives us of that connection. Finally, and many of my peers will agree, possibly the worst disadvantage is the cost associated to food-delivery services. Restaurants have to pay a 20-30% of their revenues from every order to food-delivery providers. (Something I’m most definitely not happy about and have a difficult time justifying!!) Some food delivery companies only settle the bill of orders once a month resulting in a delay in payments and the fact that we have to share a significant proportion of our revenue.
Despite its disadvantages, we restaurateurs have to accept that the food-delivery concept is here to stay and it is revolutionizing our industry whether we like it or not. This is not the first time third-party service providers have swooped in and disrupted industries. Hotels used to have so much control over their business in terms of sales and marketing but they fell asleep on the online segment and all of a sudden, one fine day, online travel agents like agoda , booking.com and the likes penetrated the market. Ever since the last 5-10 years, they’ve almost taken over the hotel business. Hoteliers today are paying 20-25% of their room rates to these booking agents. We see a pattern here. The only difference, I hope and believe is that the restaurant industry has braced itself for this revolution and is embracing the changes that it brings with it. We know food delivery is here to stay, but where is it going?
There are new food delivery apps popping up every few months or so and yet, accordingly Morgan Stanley analysts, the food delivery demand is going largely unmet. They say that the food delivery market in the world is worth about $30 billion but has the potential to be worth at least $210 billion.The report suggests that ‘the best move for restaurants would be to build their own in-house delivery businesses rather than relying on third parties’. Whether or not we are able to do that, I believe that the restaurant industry needs to up it’s game in terms of food-delivery whether it is investing in partnerships with efficient and effective food-delivery service providers or creating their own in-house delivery services, like we are contemplating with our newly opened Italian place- Cantina Wine Bar & Italian Kitchen. Having said that, I believe that there is an opportunity for us restaurateurs to cash-in on this new food-trend as there is a huge potential for profit if only we are quick enough to jump onto the bandwagon of this phenomenal revolution.