Food delivery startups: the battle for survival
Priya Wadhwa
Industry Watch

Food delivery startups: the battle for survival

The market is growing, but is overcrowded and saturated. We investigate what's next.

From local competitors to international players, almost all market gaps seemed to be occupied. How can delivery startups compete for a larger market share amongst fierce competition?

Ah, food! It’s the top trending content genre on social media, which has helped the food industry change consumption behaviour faster than ever imagined. From bringing family and friends together around the dining table until just a decade ago, to kitchens becoming almost unused and people eating alone out of takeaway containers. However, it has also inspired the world to innovate with food, to improve its taste and provide exceptional experiences.

The race to profit from this trend and stay competitive is continually giving rise to restaurants and food delivery solutions. The trend has shifted from which restaurant to order from, to which food delivery app to use — but the decision fatigue has remained a constant, just switching from one to the other.

Despite the economic instability, there are more people ordering food than cooking at home; mostly citing the cheaper prices (due to competition) and lack of time or energy to cook. The other aspect is that food remains the one splurge that the younger generation can afford relatively often.

In line with this pattern, and despite the competition and price wars between hundreds of restaurants, Dubai saw 1,109 restaurant and cafes open in 2018, compared to 1,011 in 2017, making the city home to 11,813 food providers.

Naturally, these growing number of restaurants and customers need food delivery solutions — and there is an immense potential to innovate, as seen by delivery providers; from live tracking (Careem, Uber, Zomato), to making use of restaurants’ less busy hours to provide bulk orders at value prices (Lunch:ON), no minimum orders (Carriage), to providing multiple offers and value meals (all platforms), to delivering quicker on average and exclusive partnerships with restaurants (Deliveroo). There is an entire spectrum of customer and restaurant needs that these platforms can fulfil.

However, as with any profitable industry and competitive market, the moment one delivery platform innovates its offering to plug a market gap or cater to a need, the others ape the concept to stay relevant and competitive in the market. Naturally, this only makes all platforms similar, leading to them losing their special wow-factor — and more importantly, not standing out in the minds of the consumers. Leading back to the problem of consumer’s decision fatigue.

Offering deals and discounts to customers isn’t a unique proposition anymore, with hundreds of offers on credit cards and apps such as The Entertainer and Smiles by Etisalat. Even the price sensitive market segment does not have the time or patience to compare offers between different apps and are more likely to stick with one or two platforms.

That's why it is so inextricably essential to keep innovating, offer uniqueness, solve a problem, cater to a need, or simply tap into other revenue streams. Lunch:ON is a stellar example of all the above. Not only did they find an opportunity to create a win-win for restaurants and food orderers, but they also made the platform efficient by tapping into the untouched potential of restaurants to make use of their off-peak hours, while resolving consumers’ need for value meals as well as offering a solution for decision fatigue. They’ve also started a catering service that provides valuable options for businesses who’d like to order food for conferences or celebrations.

The decision fatigue and need for value meals didn’t go unnoticed by industry peers either, as Deliveroo and other platforms started offering few value meal options at approximately AED 25 (plus delivery), without the condition of having to order before a set time. Plus, they gave out an ingenious marketing merchandise, the laptop camera cover, to increase its top of mind recall.

The mobile first delivery platforms are also being tapped into by restaurants themselves. Popular Middle Eastern street food restaurant Operation:Falafel was one of the first to launch an app people could order from at a 10% discount, while collecting points and getting special offers. In March, PizzaExpress, a global pizza chain, also launched its app in Dubai with similar benefits.

Other restaurants too are tapping into the food delivery sector, and not just with apps and traditional delivery services. Many of the clean eating and organic restaurants are providing meal plans, such as Little Erth by Nabz&G; which is again an answer to decision fatigue, generating new revenue streams, as well as the need for value meals and healthy food.

With all these innovations and competition, restaurants are operating at full capacity, creating a new avenue for business potential — kitchen on hire — as is tapped by Kitopi, a new startup to look out for on the food block.

While many are entering the already saturated market in the UAE, Zomato, one of the oldest players of the region, has sold its food delivery business to German Delivery Hero. However, this curious move comes in line with their long term strategy to strengthen their core business in India, which is not yet as saturated, along with tapping into the potential of drone delivery through its acquisition of TechEagle. Now that’s something people to get people excited.

Food is an emotional and sensory experience, and is even with the strong competition, a great source of revenue and growth — but only for those who innovate while staying true to their identity. It’s easy to get lost in the crowd in an attempt to offer everything. So in a market where most are competing for a larger share of the pie, perhaps it’s better to create a niche with loyal customers.

This may be hard for the price-sensitive segment, but as the price competitiveness remains constant across all platforms, there are other service aspects to explore. Perhaps in the near future we’ll see food delivered by drones, food packaging that provides unique eating experiences become a new trend, or people sending kitchens links to the food they saw on Instagram in order for them to recreate and deliver them. The opportunities for innovation are endless.