The Food Delivery Revolution: How the rise of third-party platforms is transforming the food delivery market in the Middle East.
The food delivery market has undergone a global transformation over the past five years, driven by a rise in mobile internet, increased smartphone usage, and an influx of third-party online ordering, discovery and delivery services. Valued at AED12.9 billion, the home delivery and takeaway market in the UAE alone is growing at a rate of 6% annually and this is set to continue for at least the next five years.
Third-party platforms are not only improving the reach of those businesses that offer delivery already, but providing new business avenues to restaurants that wouldn’t normally deliver. Diana Jarmalaite, research analyst at Euromonitor International comments: “The traditional business model whereby you can only get takeaway from specific restaurants has changed tremendously in the past five years. We observe that restaurants that wouldn’t normally go into delivery are now doing it, and that’s because of the market conditions and demand.”
While many restaurants offer their own delivery platforms, most now also partner with third-parties to increase their reach and exposure, and these services are working hard to differentiate themselves from the competition. Some of the popular players include homegrown food ordering platform Talabat, which prides itself in strong local knowledge and reach; Zomato, which works across 23 countries globally and aims to offer the widest choice of restaurants available; and restaurant discovery platform Roundmenu, which plugs into popular review and social media sites and is available in Arabic and English.
“The traditional business model whereby you can only get takeaway from specific restaurants has changed tremendously in the past five years. We observe that restaurants that wouldn’t normally go into delivery are now doing it, and that’s because of the market conditions and demand” – Diana Jarmalaite, Euromonitor
A major disruptor when it entered the Dubai market in 2015 was online delivery platform Deliveroo, which uses its network of self-employed agents to deliver food on behalf of partner restaurants. Unlike discovery and marketing apps, Deliveroo mainly targets restaurants that don’t have their own couriers but also works with those that do. Utilising a similar business model, Toronto-based UberEATS, from online transportation network Uber, added Dubai to its portfolio of 32 markets in September 2016 and is investing heavily in expansion.
According to Manhal Naser, co-founder and CEO, AWJ investments, the company behind Operation Falafel, the rise of a strong network of third-party delivery and discovery platforms is an incentive for restaurants to invest in their delivery services. Naser comments: “Third parties have presented an opportunity to many restaurants to open delivery units and have justified the need to have a budget for this growing area of the market, and this has allowed for a wider target audience and has introduced the brand to new customers.”
Utilising third-parties, independent restaurants and smaller chains can now reach a wider range of customers without having to invest in their own online sites and marketing. For example, Chippy’s, a new British fish and chip shop takeaway, from the founders of seafood restaurant Senara on Dubai’s Palm Jumeirah, has reported increased brand exposure and reach, and improved product quality due to third-party partnerships. Chef Anthony Reilly comments: “We pride ourselves on our quality so we want to ensure food is hot and in prime form on arrival. Working with different delivery companies as well as our own enables us to service a greater area, while maintaining the quality of the product.”
In addition, Euromonitor research has shown that offering delivery actually boosts dine-in volumes for many restaurants. AWJ Investments’ Naser confirms this, commenting: “The presence of the delivery option makes us available to a wider audience, which we can cater to outside of the restaurant and this has raised brand awareness and created loyalty, which gets that same customer to join us once they are eating outside of home or work.”
Mira Al Lozi and Rama Mamlouk, co-owners of Dubai-based Circle Café agree, adding: “Over the past five years we haven’t seen any negative impact directly related to delivery and takeaway orders. In fact, we have seen that some of our previous delivery-only customers will use our restaurants when they are near one of our locations.” However, the emergence of more third parties has also put pressure on restaurants to improve the quality and efficiency of their in-house delivery operations, Mamlouk adds. She comments: “With the advancement of new apps, ordering systems, and delivery systems, we have seen the client become less tolerant of long delivery times and poor quality of delivery food.
“Companies like Deliveroo and UberEATS, by adding delivery times on their websites, have raised the bar even more, giving the customer a set time-frame in their mind. It’s not only a race against the clock, but it is also about getting the same dine-in quality to the guest at their home. People expect the food quality won’t drop just because it is delivery, and restaurants are having to find innovative ways to achieve this expectation.”
“Third parties have presented an opportunity to many restaurants to open delivery units and have justified the need to have a budget for this growing area of the market, and this has allowed for a wider target audience and has introduced the brand to new customers” – Manhal Naser, AWJ Investments
Some restaurants working solely with their own couriers are also feeling pressure to eradicate delivery charges and lower minimum payments in order to compete with those using third-parties. Najib Yaacoub, operations manager, The Noodle House, which currently doesn’t work with any third parties, comments: “The brand has changed policies in order to become more accessible to consumers, having dropped the minimum order fee to just AED50, and there is no longer a delivery charge.”
Meanwhile, co-founder and CEO of SugarMoo Desserts, Raki Phillips is looking to convert third-party business to direct business. He comments: “We understand that some customers are more comfortable going through third-party platforms for delivery; we can’t change a user’s preference and it has only increased our business so we look at it as positive. Our hope is that customers will try our desserts through third-parties, find out more about us, and then in the future order directly from us.”
And so, the growth of the delivery market doesn’t just mean there is more competition between third-parties. It means that restaurants must also up their games to ensure their in-house delivery operations remain competitive. While restaurants are embracing new platforms, improving menus and ensuring quality of products, delivery and discovery platforms are consolidating their restaurant partners and customer bases. Two important considerations for all players looking to take advantage of the region’s growing delivery market, are geographical reach and user experience.
“We pride ourselves on our quality so we want to ensure food is hot and in prime form on arrival. Working with different delivery companies as well as our own enables us to service a greater area, while maintaining the quality of the product” – Chef Anthony Reilly, Chippy’s
For example, Noodle House is looking to expand its reach through its own facilities, by introducing a fourth delivery hub at the end of 2016, adding another 15 delivery locations to its existing 70. “We’ve realised we have to be closer to our customers and we have to be able to cater to more areas where current delivery may not reach. For this reason, we’ve been working on delivery hubs across Dubai, which will allow us to prepare the same quality food, faster, and these are placed in key locations that will help us reach new areas,” comments Yaacoub.
However, Deliveroo is also looking to facilitate improved reach of its restaurant partners while increasing efficiency for customers. “Within the next few months, we are planning to launch Roobox, a fully-equipped off-site kitchen built in an area of high demand for delivery, which allows the partner restaurant to grow and expand their business. Our customers love it too because it means that their favourite restaurants have expanded their delivery areas,” explains Deliveroo UAE general manager, Anis Harb.
For Zomato, the focus is currently on improving the user experience. The company recently acquired Sparse Labs, a logistics tech start-up, which helps restaurant partners to track and optimise their in-house delivery fleet. Sugarmoo also wants to make the in-app user experience more streamlined, according to Phillips: “It has to be a seamless experience, from the moment you order, to tracking the driver, making changes to your order and giving feedback.”
“Companies like Deliveroo and UberEATS, by adding delivery times on their websites, have raised the bar even more, giving the customer a set time-frame in their mind. It’s not only a race against the clock, but it is also about getting the same dine-in quality to the guest at their home” – Mira Al Lozi and Rama Mamlouk, co-owners, Circle Café
Roundmenu is also looking to improve user interface, and reduce clutter and order time, however managing partner Ali Sinaei’s key focus is on increasing loyalty between customers and restaurant partners, which he believes is the key to standing out on the market. “We are working with our clients to gather user information to be able to reward their most loyal users. Loyalty is the key going forward between success and failure for more restaurants,” he says.
Ultimately, the winners will be those companies that can innovate products and services as competition increases, according to Euromonitor’s Jarmalaite, who highlights a positive outlook for the home delivery and takeaway market in the UAE. According to Euromonitor statistics, this is expected to grow by 31% during the period 2016-2021.
Jarmalaite comments: “Competition is still growing because the market still has space to accommodate more. It depends what you can offer; how many restaurants you’ll be able to attract to use your services; how well you’ll be able to attract customers; why they would order from you and not someone else; the payment methods; the promotions.
“In the long term, naturally the bigger, more competitive and more innovative platforms will remain and those less attractive platforms will diminish and maybe leave the market. However, currently it’s a growth market and we don’t see that changing any time in the next five years,” she adds.