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​Online firms on a roll to feed big appetite for on-demand food

Published on: 30-Oct-2019

Singaporeans have developed a ravenous appetite for online food delivery, with riders now a common sight at restaurants and hawker centres around town and it is only going to get bigger from here. 

Delivery firms told The Straits Times there is still room for growth - new customers are still being acquired while the tech-heads are constantly tackling the question of how they can boost consumers' order frequencies.

Recent studies back up their optimism. A report released by Google, Temasek Holdings and Bain & Company this month said the food delivery sector in South-east Asia could grow to US$20 billion (S$27.4 billion) by 2025, almost four times its current US$5.2 billion.

But on-demand food delivery is a competitive arena and platforms here have been moving into other business areas, leveraging on their expertise in food and beverage to generate new revenue streams.

Associate Professor Geoffrey Chua from Nanyang Technological University's Nanyang Business School noted that food delivery players could change their pricing model, such as introducing subscription plans. 

Although he thinks the food delivery sector is not likely to slow down any time soon, "the market will eventually saturate" and there is a need for players to expand to other services, which firms here have shown.

Foodpanda, one of the early entrants in food delivery here, is looking at selling marketing packages to the more than 7,000 restaurant partners it works with.

Its Singapore managing director Luc Andreani told The Straits Times that the company does targeted marketing on its platform for a mix of vendors who request promotions or have been selected for marketing initiatives.

The vendors that foodpanda promote are usually either new clients that it wants to increase visibility for, brand names which have "untapped potential" or larger clients who "deserve special treatment". 

Mr Andreani said: "It's very much a direction that all e-commerce platforms are heading towards. It's just a very natural direction that we empower the vendors to do more and more marketing on their own, but at some point, they have to pay for it."

Local start-up Oddle, which provides delivery platform services to food and beverage operators, started providing marketing-as-a-service to restaurants late last year. 

It works with around 1,000 food merchants here. 

Oddle's marketing service - which operates offline and online - is also bundled with its commission-based business model.

Oddle chief financial officer Solomon Tan said: "The opportunity for restaurants is that this is an outsourced marketing role where it's more effective for us to do it for them.

"They can continue to do what their operations need, yet access the sophistication that's required to run an online business."

Deliveroo launched an online portal in October last year that also allows restaurants to set up their own marketing options.

It has 6,000 restaurants and about 2,000 hawkers, foodcourts and small establishments on its platform.

The portal provides restaurants with access to data on their orders and customer ratings. The promotion-setting function gives restaurants more control and flexibility over how they market to their consumers, said Deliveroo Singapore country manager Siddarth Shanker.

Several players told The Straits Times that they intend to use their fleet in other areas beyond on-demand meal deliveries.

Ms Annetta Chan, head of business development and strategy at food delivery company WhyQ, said it has ventured into delivering seasonal food products.

WhyQ, which partners with around 2,200 hawker stalls across more than 20 food centres, has offered seasonal items like Deepavali sweets and bak kwa on its delivery platform as well. 

GrabFood has also seen success with its seasonal food offerings, especially its durian delivery service introduced in 2016, said Mr Dilip Roussenaly, head of GrabFood Singapore.

It started offering mooncakes and salted egg snacks through its platform this year. 

Mr Andreani said foodpanda is looking at how it can add other services and product types so it can better deploy its fleet, which has more than 8,000 active riders. But he did not elaborate on these potential new initiatives.

National University of Singapore Associate Professor Lawrence Loh noted that food delivery firms are moving from online to offline food operations, like Deliveroo with its Editions food market.

"It's still a new concept and there is much potential in the integration of delivery platforms into the restaurants," he said.

Deliveroo launched its first Editions central kitchen in 2017 and has added two more since. 

Its first location is purely for fulfilling delivery orders, while the other two have dine-in spaces as well. 

Mr Shanker said: "Editions is a very important business. We've gone into brick-and-mortar and there's a significant capital expenditure involved."

He said the company decides on locations based on where there are clear gaps in terms of food options and service, adding that it has launched its Editions kitchens in a slow and steady manner.

Several restaurants that were launched in the first Editions kitchen are also operating in the newer locations, which demonstrates that the model is working for them, Mr Shanker added, noting that Deliveroo is looking at other possible Editions locations.

"They get access to a platform where they can experiment with things they cannot try out in their normal kitchens, but they are able to test and see what works and sometimes take it back to their original brands as well," he said.

Foodpanda has opened two central kitchens where restaurant vendors prepare the food and the companies'  riders pick up orders from. A third kitchen is in the pilot phase.

Foodpanda also plans to develop virtual brands which are 100 per cent online, allowing it to tailor the menus and price points according to the gaps identified in certain areas, Mr Andreani said.

Both Deliveroo and foodpanda are opting to work with partners to operate in the kitchens for now, as it is not a core competency for either of the companies.

GrabFood has launched delivery-only kitchens in the region, expanding rapidly in Indonesia, in particular. It has previously stated that it would set up a cloud kitchen - a delivery-only facility for online orders - here by this year, but there has not been much development.

Mr Roussenaly said: "We are taking the time to understand the needs of our merchant partners, delivery partners and consumers in relation to cloud kitchens, and finding the best solution that works for them before we launch our cloud kitchen here."

However, it set up its Hawker Hubs in August this year, where food prepared by hawker partners is consolidated at delivery hubs before the orders are delivered to customers.

WhyQ's Ms Chan said it is working on the "backward aggregation of raw materials", which would see it coordinate the supply of products like vegetables, meat items and dry goods to hawker stalls.

It is working with Enterprise Singapore on this initiative and hopes to launch the service some time in the second quarter next year.

Ms Chan said: "Through our app, it'll be a one-stop solution where they can choose multiple suppliers to work with and they can order their supplies through the app."

Hawkers usually have different suppliers for various products and some of WhyQ's partners said a platform that aggregates them would be useful, she added.

The company would work with the suppliers and their existing delivery models to assess how they can provide these supplies in an efficient and cost-effective manner, she added.

Mr Law Chung Ming, director of transport and logistics at Enterprise Singapore, said consolidating purchases allows hawkers and suppliers to enjoy improved operational efficiency and potential cost savings.

Logistics service providers may also require fewer drivers to fulfil their orders while maintaining quality service standards, he said.

"The optimisation of delivery routes and services can also potentially help to alleviate traffic congestion in areas such as carparks and loading bays," he added.

The food delivery sector in South-east Asia could grow to US$20 billion by 2025, almost four times its current US$5.2 billion, according to a report released this month by Google, Temasek Holdings and Bain & Company.

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