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Third-party food apps disrupt industry

It all starts with an extra 10 per cent here and 20 per cent there. Over time, you begin to spend the extra 20 per cent more frequently, and before you know it, the cost of convenience is affecting your long-term plan.

If you knew up-front ordering dinner on Jumia Food or Uber Eats once a week instead of four times would save you a few thousands, would you be more mindful of your takeaway consumption?

While takeaways aren’t exactly a new business, mixing it with online portals has caused the business to balloon into a multi-million-shilling empire, with more apps promising speedy online delivery mushrooming. Convenience comes at a cost. However, how that cost is perceived depends on who you ask.

“On a bad week, I order in seven days in a row. On a good one, twice. Cooking would be cheaper, there are those who would argue the pursuit of convenience is a drain on one’s bank. And yes, they’re right, especially when you factor in those little expenses such as delivery fees which add up to one big bill. However, tech innovations such as food delivery apps have made our lives easier in many ways. Due to the hustle and bustle of our fast-paced lives, it is no surprise many look for ways to save time and energy,” says James Wamathai, CEO HapaKenya.

Stiff competition

The online food delivery market is booming, with customers trading a phone call for a tap of an app. For the first time, digital orders have outpaced phone orders, seeing a major turning point. Like ride-hailing companies, these meal-delivery companies have provided a revolution in convenience by supplying instant gratification. The tipping point is telling. Eating in is the new dining out.

On-demand Spanish delivery app, Glovo the newest kid on the block, last month expanded into its third town, driving up competition among tech-based delivery businesses such as Jumia Food, former Hellofood, Uber Eats, which set up shop locally last year and has more than 420 eateries on the app, Yum Delivery, launched in 2012, Take Eat Easy, The Good Food Company and Mama Meals on Wheels. With a tap, you now have access to a veritable buffet, with hundreds of restaurants at your fingertips.

Across the world’s biggest markets, food delivery apps have disrupted the restaurant industry. Technology has reshaped the restaurant industry and how we eat. It has given eateries an opportunity to expand their market and build their own brand name in a competitive market, sentiments that were also shared by Nic Robertson, General Manager for Uber Eats Middle East and Africa.

“The app gives restaurants the opportunity to get real-time feedback from their customers on their service experience and favourite dishes. The lessons we have gathered around kitchen structures will also assist restaurants in making the most of their assets to drive new revenues.”

To an outside observer, this is a 21st Century restaurant success story. After all, in recent years, online platforms such as these have turned delivery from a small segment of the restaurant industry, dominated by fast food to a booming new source of sales for food establishments of all stripes.

Various clientele

Take, Chanya Mwanyota, owner of Mataam Swahili Restaurant in Kilimani, not only has she grown her customer base, but has also successfully opened six virtual restaurants.

“Before, I would have had to set up each individual kitchen to cater for my various clientele. Uber Eats gave me the ability to set up virtual restaurants with cuisines ranging from Nigerian, Chinese, local, Indian to Swahili. From one kitchen, I am able to capture the different culinary needs of my clients,” says Chanya proudly.

However, there are those who feel delivery orders are beginning to replace some restaurants’ core business instead of complementing it. There is worry orders are replacing profitable takeout or sit-down sales with less profitable ones, and rightly so. Take the just-concluded Nairobi Pizza Week, foodies had the joy of expanding their culinary palate by eating out in as many pizzerias and restaurants as possible.

A number of foodies were quick to point a finger at restaurants for their outrageous delivery demands thus leaving one with no choice but to seek out delivery apps or go for the unwelcome sit-down.

“I called in an order from 360 Degrees Artisan Pizza, only to be informed delivery below Sh2,000 was not possible. Pizza Week had a 2 for 1 special. My bill was Sh1,350. My ‘options’ if you can even call them that were to either top up my order, leave the comfort of my home for the pickup, hail a cab to pick up the delivery or download a food delivery app,” recalls Nick Michuki.

So is the meal-delivery boom actually a bubble, ready to pop?

“Here are some figures for you: Uber Eats charges a delivery fee of Sh50, Jumia Food Sh100, and restaurants such as Mister Wok, for any order below Sh1,500, a delivery fee of Sh300 is added to your bill. You do the math,” quips Leilah Namisango.

For restaurants, third-party apps brings a myriad of benefits: “Some people believe third-part apps charge too high a commission. In my experience though, it comes down to your bargaining power. I pride myself in being the only Swahili restaurant in my area, and now with the virtual kitchens, I have an even better rate. Also, when you have an exclusive deal with an app, they can give you as low as 20 per cent. Uber Eats charges 30 per cent, and yes that’s high, but at the end of the day, you have to look at the benefits. It gives you an edge in terms of market exposure, so it all comes down to whether you are willing to incur these charges as marketing costs or not,” says Chanya.

However, there are industry players who are of the opinion that partnering with food delivery apps doesn’t make economic sense.

“The market is small and as it stands, we have too many players. It comes down to who can withstand the losses. The meal-delivery apps also do not understand the market, especially the big brands. The arrogance from big brands is appalling. The 30-35 per cent commission they ask for is ridiculous. One firm proposed if we signed exclusively with them we would get a 20 per cent rate. Why? We’ve been around for 15 years, we are a household name. These apps are ostensibly giving restaurants business, but effectively taking it away. I said hell no and you can quote me on that,” Hussein Virani, MD Mister Wok says.

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