The marriage of food delivery aggregators and restaurants – A work in progress

Ola cabs bought Foodpanda. Unless you have been living under a rock you have heard the news and its possible implications splashed all over. After its failed attempt at Ola cafe, this seems the other approach for Ola to get back into what seems a lucrative business.

Food Tech, a broad umbrella under which many business models operate with one objective; to bring food to the customer in all its avatars with the aid of technology. In the range of companies that exist, the one model that has remained most prominent was that of online restaurant aggregator. Whether it is FoodPanda (now with Ola) or Zomato or Swiggy, this food delivery model has been the face of food tech. The latest entrant to this is UberEats and soon to be launched an app by Google Areo.

Technology has changed consumer behavior and has brought unlikely bedfellows together. Different companies have played to their strength, whether it is logistics like Uber or Ola or an existing customer base like Google for a share of the proverbial pie.

The food tech sector started off on a high note and was the trending sector in 2014-15 in India. It now stands at the crossroad of opportunity and challenges. While funding dipped across most sectors in 2016, the food tech sector was the hardest hit. Analysts report that it received a funding of $80 million in 2016 as compared to $500 million in 2015. It has gained traction again with over $300 million invested until October 2017 and estimated the market worth of $ 540 billion in the next three years.

The aggregator buffet

The industry is fragmented and there is no one clear go-to model that seems have it all figured.The growth for the sector in India is from Tier 1 cities and the aggregators intend to keep the focus to grow in these locations itself.

Companies must pay attention to both parts of the coin, developing capabilities in-house and take care of who they are partnering with. An efficient aggregator with a list of not-so-good restaurant partners is as likely to fail as a good full stack food company whose logistics is inefficient. The market seems to head towards aggregators owing part of the chain, maybe delivery or food production or both.

Commission Conundrum

People look for quality food, that can be ordered and delivered in a manner, time and location convenient to them. Consumer experience has dictated the trend today. At the helm of this restaurant business has had to change its approach to be profitable. Are aggregators a boon or bane to restaurants? Let’s have a quick look-

Pros

  • Bringing in visibility and order increase
  • Delivery and logistics supply chain taken care of

Cons

  • A percentage of commission from its earnings
  • Dependent on delivery logistics for customer experience of its brand.

In an industry that is emerging on the go what must restaurants do to be more just a passive partner in the food tech game.

Till the fog clears the answer seems whatever they can, which will include some of these measures

  1. Building their websites to an optimum consumer transaction experience.
  2. Use and develop their own marketing channels including social media to build their brand and consumer base.
  3. Look to value add in all levels to build a strong consumer community.
  4. Assess their own organisation and having the back end ready to cater to growing number of orders.

If the restaurants are constantly upping their game, it can be of indispensable value for the food delivery aggregator or any other model that food tech will shape into.

Looks like the market is ripe for lot more deals for meals on wheels.

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