Is the food aggregation and delivery sector ready for a 'Reset'?
The 'reset' button will challenge this unstable equation. New verticals, newer ways to find customers without making your partner restaurant pay for your aggregation business will be the call of the hour.
'Reset' is the most oft repeated word by economy experts as they try to sketch the post covid business scenario. The question to be really answered is whether this 'Reset' will change business fundamentals or will change customer behavior. The new age app driven multi billion dollar valued businesses will continue to see excessive pressure to make sense of their non existent bottom lines. Customer acquisition which was the mantra that drove these businesses may get a long overdue shakeup as customers may not be there to be acquired.
An economy in revival mode calls for innovation in every aspect. Especially in defining new markets, new customers and even a new product mix. The food delivery and aggregation market is due for such an overhaul. Driven and grown purely by the ' convenience ' factor for the last five years, this market is ripe for smart new verticals that actually deliver unit economics, make every order they deliver count in terms of meeting delivery costs and profitability at the net level. Easier said than done, as the food delivery market demands an immediacy that is primarily exclusive to this market. One expects a food order to be delivered within 30 to 40 minutes after placing the order on the App. This results in huge pressure on the logistics team. The scope for a single manpower resource ie delivery boy to deliver multiple orders in a single trip is just not there. Every customer demands preference in service and carrying multiple orders for delivery will mean delaying delivery to one customer or the other. This results in one delivery boy making one delivery every time he rides out. Urban manpower costs backed up by expensive fuel ensures every delivery loses money. This has to change.
From the customer perspective, the ' hub & spoke' model of logistics that the food aggregators offer limits their choice. One can order from restaurants available within a radius of only 4 to 5 km of the location one is in. So if your favorite chinese restaurant is 10 km away, forget it ever being delivered to you! As the market matures, so do demands of the consumer.
'Lazy boy' armchair convenience ordering will give way to 'Lazy boy' armchair gourmet ordering.
The challenge would be to innovate and create markets that crunch delivery costs, get them to be a decimal percentage of the order value. This would work as a huge boost to the restaurant sector which is bearing the brunt of subsidising food delivery aggregators by parting as much as 30% of the order value as discounts. Aggregators essentially provide service, they do not produce the food that the customer chooses to order. The cross has to be borne by the service provider and not the producer. And that is where the Indian food aggregation and delivery market has failed. The 'reset' button will challenge this unstable equation. New verticals, newer ways to find customers without making your partner restaurant pay for your aggregation business will be the call of the hour.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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